Fed chief, Janet Yellen, said the economy can still grow at the current rate. The central bank decision triggered the biggest gains in global equities since June.
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The Fed’s decision, which came the same day that Japan’s central bank added a long-term interest rate target to its massive asset-buying program in an overhaul of its policy framework, was widely anticipated by economists.
USA stocks are rising Wednesday morning, following global markets higher, as investors wait for the Federal Reserve to conclude a policy meeting. They said they expected Japan’s central bank to eventually slash its policy rate further.
In situations like this, the FOMC should want to set its policy interest rate at neutral – the value it regards as neither encouraging expansion nor contraction.
The Dow Jones industrial average added 82 points, or 0.5 percent, to 18,211 as of 10:15 a.m.
Spot gold was down 0.3 percent at $1,332.80 an ounce by 0402 GMT, while USA gold futures rose 0.4 percent to $1,336.70 an ounce.
Oil prices jumped as fuel stockpiles shrank and investors hoped that supply gluts are easing, which would allow prices to rise.
The Nasdaq is up 50.62 points, or 1 percent. Brent crude futures settled up 95 cents, or 2 per cent, at $US46.83 per barrel.
The Federal Reserve held its fire on Wednesday, but sent a strong signal that an interest rate hike is likely this year, putting the focus on hawkish dissents in the latest statements that could sugegst a move just ahead of the presidential election.
In a statement from the FOMC, the central bank expressed confidence in U.S. economic growth, but not enough to make a move this month.
After the Fed’s statement, traders were betting on a 63-per cent chance of a December rate increase, up from 58 per cent just before the statement, according to the FedWatch website. Inflation has remained below that level for over three years. The likelihood of keeping rates unchanged in its December meeting was at 40.7%, marginally changed form 40.8% a day before.
During the long post-crisis recovery, he had consistently called for the Fed to hold down rates in order to lower unemployment.
The last time any board member has dissented from a Fed policy vote was more than a decade ago, in 2005.
By Fed standards, that’s a divided result.
The Fed releases transcripts of its rate setting meetings five years after they take place. The stock rose $9.15, or 5.6 percent, to $172. The ruling boosted dividend-paying companies while bond prices changed course and moved higher. Its stock climbed $7.23, or 7.2 percent, to $107.85. The metal rose almost 3 percent in the previous session.
Yellen said, “This cautious approach to paring back monetary policy support is all the more appropriate given that short-term interest rates are still near zero”.
A gradual rise in end of year rate hike expectations will keep volatility subdued in the financial markets, and with reasonable expectations that data remains slightly positive to in-line with expectations, an end of year rate hike will likely cause little volatility to the markets as the Fed has essentially extended the time frame for pricing in the next rate increase. Some analysts thought the central bank would take further steps to bolster economic growth, which would have weakened the yen. Since they weren’t, the dollar fell to 100.75 yen from 101.84 yen. For the year, the benchmark S&P 500 is up 5.8 per cent. The euro dipped to $1.1144 from $1.1157.
Among other precious metals, spot silver touched a two-week high of $19.88 an ounce. That rate, which determines what banks charge each other for loans, is now in the range of 0.25 percent to 0.5 percent.
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Palladium rose 0.2 percent to $684.30. Tokyo’s Nikkei 225 reversed an early loss and closed 1.9 percent higher. The Hang Seng of Hong Kong gained 0.6 percent and South Korea’s Kospi rose 0.5 percent.
