The Fed has repeatedly said it wants to see increasing job growth and signs of stronger inflation, before it raises rates. Things weren’t all rosy, the Fed noted that inflation is “expected to remain low in the near term” and then rise as the decline in energy prices turns and the labor market continues to strengthen.
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“Near-term risks to the economic outlook have diminished”, the FOMC said in announcing the outcome of the closely watched two-day meeting in Washington.
In a statement released Wednesday, Fed officials said, “near-term risks to the economic outlook have diminished”.
As expected, the Federal Open Market Committee kept its overnight interest rate target in the 0.25 percent to 0.5 percent range.
At the start of the year, the Fed projected that it would raise rates four times in 2016.
The wordings such as “near-term risks to the economic outlook have diminished” and that job gains were “strong” are construed as USA rate hike signals by economists.
The Fed’s decision was made as companies released second-quarter earnings and revenue reports – many of which beat analysts’ expectations, adding a bit of momentum for the us economy near the end of July.
While, Fed Chairwoman Janet Yellen has repeatedly mentioned intentions of a gradual Fed rate hike, market volatility and the unexpected dip in job gains have upset the cause.
It gained to 94.39 Australian cents from 93.98 cents after figures yesterday showed Australia’s consumer prices remained weak in the second quarter, keeping alive expectations the Reserve Bank of Australia will cut the cash rate a quarter point to 1.5 percent next week. According to Fed officials, those concerns have dissipated. “They are seeing the economy improving further, which rings in a rate hike in September or December”, said Vaibhav Sanghavi, managing director of Ambit Investment Advisors Pvt. Ltd.
The closely-watched US monthly employment report will be issued on August 5, followed three weeks later by a speech from Fed Chair Janet Yellen at the annual central banking conference in Jackson Hole, Wyoming.
There are three more Fed policy meetings left this year – in September, November and December.
USA crude rose 0.3 percent to $42.04 a barrel on bargain hunting after sliding to a three-month low of $41.68 on Wednesday after news US crude and gasoline stocks had surged, reflecting weak demand during the peak summer driving season.
The Federal Open Market Committee (FOMC) once again made a decision to maintain the current target for the federal funds rate at 25-50 basis points in July.
Joel Naroff of Naroff Economic Advisers said the Fed appeared torn between optimism and fear.
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It has been seven months since the Fed raised the rates last. He reasons that the November FOMC meet will be too close to the USA election.
