“Near-term risks to the economic outlook have diminished”, the Fed’s policy statement said on Wednesday.
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“There wasn’t any tip that the Fed will raise rates in September”, said Mike Materasso, co-chair of Franklin Templeton’s fixed income policy committee in NY.
The US central bank said while risks to the US economy have eased and the labour market is getting tighter, suggesting the chances of a rate rise happening after the November elections have increased. But uncertainty about the global economic consequences of Britain’s exit from the European Union remains.
“With optimism still visible over the Fed taking action in 2016, the main driver behind gold’s resurgence could be risk aversion”, said Lukman Otunuga, FXTM research analyst, in a note to clients.
Stock averages posted a modest increase Wednesday after the statement was issued at 2 p.m. Eastern time, before drifting lower later in the afternoon.
The Dow rose as gains in shares of Apple and those of Caterpillar, recently up 7.2 percent and 1.3 percent respectively, outweighed slides in shares of Coca-Cola and those of McDonald’s, down 3.4 percent and 1.7 percent respectively.
Fed expects that economic conditions will evolve in a manner that will warrant only “gradual increases” in the federal funds rate and the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. Kansas City Gov. Esther L. George dissented, once again favoring an aggressive hike of.50% to.75%.
Commenting on this week’s decision, Kelly says: “Near-zero rates are incongruous with the Fed’s positive view of the economy”.
“The bias over the near term is for the market to continue to move higher”, said Eric Wiegand, senior portfolio manager at U.S. Bank’s Private Client Reserve.
Fed officials gave more upbeat description of the economy. In June, employers added 287,000 jobs, the most since October 2015.
Although keeping interest rates unchanged after its July meeting, the Federal Reserve used new language keeping the door open for a rate hike in September, experts told Anadolu Agency on Thursday. Anemic hiring in April and May, though, raised concerns, and it left rates alone.
Now, though, the pendulum has swung back, especially after the arrival of a reassuring June jobs report.
In a volatile session, the Dow Jones industrial average finished down a marginal 0.01 per cent at 18,472.17 points and the S&P 500 ended down 0.12 per cent at 2,166.58.
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“They could also have downgraded capital spending if they wanted to, but they didn’t do so”, Kelly said, “They’re clearly trying to send a signal here that our worst fears have not yet been realized and there’s very little wrong with the economy here”. This was achieved after back-to-back months of weak job growth. Ahead of that, Abe announced plans for extra spending worth more than 28 trillion yen to help boost growth.
