While the majority of Fed policymakers still expect a rate hike at its October or December meeting, the money markets are increasingly expected it may wait until 2016.
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“The Fed’s assessment of the global economic conditions has made investors nervous as uncertainty about the timing of a U.S. rate hike continues”. Only one committee member favored a 0.25 percentage point rise.
The sell-off in China and global market volatility over the last month has kept the Federal Reserve from hiking interest rates despite stronger domestic data, according to fund managers, reports Citywire Americas.
He noted there were some who thought “if the Fed did not hike, oh my goodness, what do they know, what’s so bad in the economy that we don’t know”. There are no surprises there.
“The situation overseas bears close watching”, Fed chair Janet Yellen said at a press conference Thursday.
Though the Fed had not been expected to raise interest rates for the first time in more than nine years, investors appeared anxious by the lack of guidance from the central bank and its concern about the global economy.
The USA dollar, meanwhile, lost ground against currencies in Asia, especially the Japanese yen. It raised its expectations for economic growth this year to 2.1% from 1.9%, and it lowered its projection for the unemployment rate by the end of the year to 5%. The Fed has a mandate to stabilize price levels, which it has defined as 2 percent annual inflation. On Friday, the dollar steadied against the euro after falling in the wake of the decision the euro was down 0.2 percent at $1.1418.
“The Fed is still on hold, which is an overhang for the market”, Robert Pavlik, chief market strategist at Boston Private Wealth. So, they are going to keep trying that same policy that has not worked in the past.
“This statement sounds quite dovish and gives the Fed an excuse to keep the status quo”, FastMarkets analyst William Adams said, added that the central bank does not want the USA recovery to be stunted by weak growth in China and other emerging markets.
Following the announcement, stocks oscillated Thursday.
The three major stock indexes each fell more than 1 percent, with all 30 Dow components in the red. On the Nasdaq, 1,822 issues fell and 878 advanced.
In the United Kingdom , the reaction from business groups was mixed.
Friday’s stock sell-off came after the Federal Reserve chose to … In holding rates steady, the Fed noted global uncertainties and subdued inflation.
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