The Federal Reserve issued a FOMC statement noting that the labor market has continued to strengthen and that economic activity has been rising at a solid rate despite hurricane-related disruptions.

According to the FOMC, household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. Gasoline prices rose in the aftermath of the hurricanes, boosting overall inflation in September. However, inflation for items other than food and energy remained soft.

On a 12-month basis, both inflation measures have declined this year and are running below 2%. Market-based measures of inflation compensation remain low. Survey-based measures of longer-term inflation expectations are little changed, on balance.

The committee continues to expect, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. Inflation on a 12-month basis is expected to remain somewhat below 2% in the near term but to stabilize around the committee’s 2% objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the committee decided to maintain the target range for the federal funds rate at 1% to 1-1/4%. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2% inflation.

The committee said it expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.