The policy making arm of the Federal Reserve is leaving the federal funds rate at a quarter of a percentage point, unchanged from the rate decided upon at the last meeting in June, according to the Federal Open Market Committee’s statement.
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After all, the stock market is hovering near a record high and U.S. second quarter corporate earnings so far have been a bit better than expected. “The Fed is going to have to try and pull off one or two rate hikes this year without causing the dollar to strengthen significantly, which would hurt growth”, Sweet said.
George didn’t vote against holding steady in June. “That’s the meeting prior to when it raised rates last December”.
Some seasoned Fed watchers are betting the Fed is flagging a possible September move, to prepare markets for the real intended tightening in December. The market really hasn’t had very much priced in at all until the back end of 2017.
Ahead of the Fed statement, the census bureau is scheduled to release durable goods orders at 8:30 a.m. ET and the National Association of Realtors (NAR) pending home sales are due out at 10:00 a.m. ET.
With a Fed rate hike out of the way for now, the world’s central banks continue overall to show a strongly-dovish easing bias.
Sure, it rose to 33% chance of a rate hike by September (the date of the next Fed meeting) from 28% on Tuesday. A week after the Brexit poll it read zero and some economists had expected the market-destabilising United Kingdom vote to spell a U.S. rate cut.
For savers, this is yet another example of how gradual rate hikes will be.
The next Fed rate hike should have more of a positive impact since it will indicate that the December rate hike wasn’t just a one-time event.
For a rate hike, the Fed has adopted a cautious stance against a number of factors throughout the first half of this year such as potential risks in foreign economies, the fragility in global markets and the United Kingdom voting to leave the EU.
The US dollar index is stronger on Fed day. “Although the trend has softened a little in July, the path of USA online prices captured by PriceStats continues to warn that inflation expectations are potentially too low”, Metcalfe added.
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A few Fed officials are speaking over the next few days.
