However, the central bank said it wants to see more improvement in the job market before raising rates.
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The Australian dollar has gained nearly one US cent after the US Federal Reserve decided against raising interest rates, while the new head of the Reserve Bank of Australia indicated there is little chance it will cut rates in the short term. It was the first time it has used that wording since last December, when it last raised rates. They said they expected Japans central bank to eventually slash its policy rate further. “While a cut in the Fed’s outlook for rates and the weaker USA dollar no doubt played a part, the continued efforts by Bank of Japan to bolster economic stimulus also helped”.
” Markets are getting support not only from the inaction of the Fed but also the relatively dovish comment by Janet Yellen”.
In its latest survey of the economic outlook of the advanced economies, the Organisation for Economic Co-operation and Development has revised down its global growth estimate, citing weak trade growth and lower productivity. The nation’s unemployment rate – at 4.9 percent – characterizes a labor market essentially at full employment.
On balance she expressed more concerns about the threat of overheating, saying the current pace of job creation, at 180,000 a month, “is not sustainable over the longer run”.
Yellen made clear that weak inflation was still the anchor holding United States monetary policy down, but that the issue was of a different degree to Japan’s.
“The BOJ now essentially promises to purchase JGBs for even longer, until inflation exceeds, and not merely meets, its 2 percent inflation target”. They anxious that delaying an increase even for two months could allow inflation to get a foothold that could only be stopped by much sharper interest rate rises in the future.
Fed policymakers, however, cut the number of rate increases they expect this year to one from two, and also projected a less aggressive rise in interest rates next year and in 2018, according to the median projection of forecasts released with its post-meeting statement on Wednesday. “Three regional Fed presidents dissented, the most in a couple of years”.
Harris at Renaissance Capital explained that the Fed has handicapped itself by not hiking rates earlier in the year.
“This seems to have been one of the most divisive FOMC meetings in recent memory”, Ashworth said. Analysts said they would be expecting a rate hike at the next meeting in November if it were not occurring less than a week before the presidential election. Norges Bank kept its benchmark rate at 0.50%, in line with expectations, and suggested that the possibility of further rate cuts had diminished. Only 6 percent of those surveyed expected the Fed to raise rates, with the majority believing it would wait until December.
The New Zealand dollar slipped to as low as $0.7316 earlier on Thursday, but later regained its footing and was last trading at $0.7362, up 0.2 per cent from late U.S. trade on Wednesday.
On Wednesday following a two-day meeting, the Fed announced that it will continue to stand pat on interest rates until it believes the US economy is strong enough to support an increase.
The Fed’s “dot plot”, a scorecard of top officials’ interest-rate predictions, reflected that hawkish bent as 14 of the 17 Fed officials see a rate increase by year-end.
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Other Fed officials, including Vice Chairman Stanley Fischer, made similar observations, seemingly part of a collective signal that a September rate increase was probable if not definite.
