As was widely expected, the Federal Open Market Committee chose to keep the target for the federal funds rate at a quarter to a half percent. Wall Street banks began the year thinking (or, hoping) that the Fed would raise rates repeatedly this year, only to see those hopes dashed after June’s Brexit vote and a weak U.S.jobs number in May.
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A statement following the two-day meeting of the FOMC said that the labor market perked up in June after a disappointing May, and household spending is increasing. However, a statement released Wednesday afternoon sounded decidedly more optimistic about the economic outlook. On the other hand, it said threats to the United States economy had diminished.
US crude rose 0.4 percent to $42.10 a barrel on bargain hunting after sliding to a three-month low of $41.68 on Wednesday after news USA crude and gasoline stocks had surged, reflecting weak demand during the peak summer driving season.
“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.
Before the Fed released its statement, traders in futures markets put a almost 21% probability on a rate increase at the Fed’s September meeting and a almost 50% probability of at least one move by the time of its December gathering.
The Fed is expected to issue a statement that acknowledges the strengthening economy without providing much clarity about when the next rate hike might occur.
“After all, “diminished” translates into still-present with strength in some sectors merely offsetting weakness in others”, she said.
ENERGY: Benchmark U.S. crude rose 15 cents to $42.07 a barrel in electronic trading on the New York Mercantile Exchange.
Federal funds futures implied traders still see roughly even odds of a rate increase at the Fed’s December meeting and about a 20 percent chance of such a move in September, a bit lower than before the decision, according to CME’s FedWatch Group.
To no ones surprise in the June meeting, the FOMC choose to keep the federal funds rate between 0.25% and 0.5%, which is the same level as when the Fed originally announced it would raise rates back in December.
But the turmoil in financial markets and a slowdown in global economy since the start of the year have raised increased concerns about the strength of the USA economy, forcing Fed policymakers to hold off on any further rate hikes since then. Eastern. The Standard & Poor’s 500 index lost 5 points, or 0.3 percent to 2,164 and the Nasdaq composite rose 18 points, or 0.4 percent, to 5,127.
Big banks aren’t giving up on a rate hike just yet, and their most recent comments reinforce that. Despite strong hiring last month and rebounding stock prices, central bank officials on Wednesday said record-low interest rates would remain unchanged for now. The FOMC also meets in November before the election.
Rates on nominal Treasurys have reached all-time lows in recent weeks, at the same time US stock market hit all-time highs.
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The US dollar slid against major currencies following the the statement. The yield on the 10-year Treasury note fell to 1.55 percent from 1.56 percent.
