The US Federal Reserve left interest rates unchanged at its two-day meeting in Washington, with the central bank indicating it could still tighten monetary policy before the end of the year.
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“While the Federal Reserve held rates unchanged, the highly unusual 7-3 vote points to the depth of its policy dilemma and makes a December hike more likely”, said Mohamed El-Erian, chief economic adviser at Allianz.
“We judged that the case for an increase had strengthened but decided for the time being to wait for continued progress toward our objectives, ” Ms. Yellen said in her press conference following the meeting.
Trump added that the Fed has created a “false stock market” due to its low interest rate policy.
The meeting of the United States central bank’s key committee came well past the closing bell at Indian bourses.
They all wanted to go ahead and hike today.
I agree with the dissenters.
The Fed decision came hours after the Bank of Japan said it wasn’t taking any new steps to bolster growth but was going to continue to try to stimulate its economy until it reaches an inflation target of two per cent a year. Banks, whose profits suffer when interest rates remain low, lagged the market.
“The BOJ now essentially promises to purchase JGBs for even longer, until inflation exceeds, and not merely meets, its 2 percent inflation target”.
Strength emerged in the energy sector after crude oil futures jumped on a large drawdown in USA oil inventories. In other words, from a macroeconomic viewpoint, the economy is doing about as well as it can.
Last week, Republican White House nominee Trump charged that Yellen was suppressing interest rates to bolster President Barack Obama’s popularity.
Investors are positioning for a rate increase at the end of the year.
As recently as late August, a strong rebound in job growth after a spring slump led Fed Chair Janet Yellen to proclaim that the case for a rate hike “has strengthened in recent months”.
Text from those speeches, combined with the dissenting members’ opinions, show members appearing to be more split than ever on how the central bank should move forward with changes in monetary policy.
They continued to settle into a new view that growth will remain sluggish for the foreseeable future.
The Federal Reserve’s next policy meeting will be held November 1-2. This is good news because it means officials believe the economy is in pretty good shape overall. Real GDP is now estimated to have increased only 1.1% in the second quarter. She called that a positive development that policymakers want to encourage by keeping rates low longer. And there is no evidence that growth in consumer prices – inflation – is accelerating. All of them favored an immediate move to raise rates.
Shorter-dated United States government debt fell while 10-year Treasuries rose, reflecting expectations that investors are toning down bets on Fed rate hikes further down the road. It was the first time it has used that wording since late previous year, when it most recently raised rates. There seems to be a pretty big discussion about the direction on rates.
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The central bank’s so-called “dot plot”, which it uses to signal its outlook for the path of interest rates, showed that officials expected one quarter-point rate increase this year. Some of the headwinds to growth are temporary, such as sluggish business stockpiling.
