The Federal Open Market Committee (FOMC) voted 7-3 Wednesday in favor of keeping the rates unchanged, but Yellen said “there is less disagreement among participants in the committee than you might think”.
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The independent bank regulatory agency, which is operated by the major banks with some federal input, said Wednesday the US job market has continued to strengthen and economic activity has picked up.
The fact that the Fed acknowledged that the case for a rate hike has strengthened due to improvements in the labor market and economic growth gave the statement somewhat more of a hawkish tint.
Analysts now believe December would be the Fed’s likely last chance to increase interest rates this year, with Dr Yellen saying she expected one more interest rate rise in 2016 if the job market continued to improve.
And perhaps most critical for some Fed officials, inflation has yet to make significant progress in rising toward the central bank’s 2 percent target range.
Energy and mining companies led gains as Brent crude oil rose 1.2% to $47.40 a barrel, while copper futures climbed 1.5% to $4,840 a ton and gold rose 0.5% to $1,337 an ounce.
If that language is strengthened â?? perhaps by noting, in Fed parlance, that the risks to the Fed’s economic outlook appear “balanced” – that would be read as a signal that a rate hike could be coming soon.
However, there wasn’t unanimous agreement over the Federal Reserve’s decision.
The Australian dollar edged up 0.25 per cent to an nearly two-week high of $0.7641 after Reserve Bank of Australia Governor Philip Lowe said interest rate cuts and a weaker currency are helping the economy, and that it was “not particularly useful” to keep cutting rates in the hope that it will eventually lift growth.
That was despite reports on Wednesday that the country’s unemployment rate rose to its highest level in 20 years.
It is unlikely the US Fed would hike rates in November, partly because of the US presidential election.
But policymakers cut the number of rate increases they expect this year to one from two previously, according to the median projection of forecasts released with the statement.
“Against this backdrop, the committee made a decision to maintain the target range for the federal funds rate at 0.25-0.5%”.
Overnight, the Federal Reserve opted to hold its key short-term interest rate steady.
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“I can say emphatically that partisan politics plays no role in our decisions about our stance regarding monetary policy”. In June, Fed officials projected three increases in both 2017 and 2018 â?? a pace that would lift the benchmark rate to 2.4 percent by the end of 2018.
