MSCI’s broadest index of Asia-Pacific shares outside Japan extended gains to 1.2 percent in its sixth straight session of increases, just 0.9 percent shy of its one-year high touched earlier this month. They think the Fed wouldn’t want to be raising rates so close to the election for fear of being seen as influencing the vote. It said it will continue trying to stimulate the Japanese economy until inflation is higher than 2 percent a year, but it didn’t reduce interest rates any further. It also reduced its longer-run rate forecast to 2.9 percent from 3 percent.
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Markets rallied earlier this week after the Fed and the Bank of Japan both chose to keep key interest rates at the ultralow levels that have fueled a multi-year stock market boom.
The Federal Reserve left interest rates unchanged in its latest Federal Open Market Committee (FOMC) meeting, a move that is likely to provide a short term boost to gold prices.
Traders have priced in an 18 percent chance of a rate hike hours before the Fed statement.
ANALYST’S TAKE: The Fed said the case for a rate hike “has strengthened, but they will need more evidence of continued progress towards its objectives”, Margaret Yang of CMC Markets said in a report. It expects the economy to expand just 1.8 percent this year and by an nearly equally sluggish two percent in both 2017 and 2018.
While Indian markets fell sharply on the day of the Fed rate hike in February 1994, June 1999 and June 2004, they were actually positive in March 1997 and December past year. Reuters cited her as saying that she expected one rate increase this year if the job market continued to improve and major new risks did not arise.
The rallies began after the Fed had on Wednesday maintained the low-interest rate environment that had helped underpin the bull market for stocks since the global financial crisis in 2008.
The Fed chair also made clear that the central bank still intends to raise rates this year. The three officials are all presidents of regional Fed banks – Esther George, of Kansas City; Loretta Mester, of Cleveland; and Eric Rosengren, of Boston.
The Fed has two more meetings this year in November and December.
Earlier, the euro touched its highest level against the dollar in almost a week at $1.1250. Homebuilders had slumped Tuesday after the US government said construction of new homes slowed down in August.
“It reinforces what the Bank of Japan did today and the scenario that we are now in a world of low rates”.
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“It appears hard for the dollar-yen rate to show a clear direction as market participants remain divided in their assessments of the new monetary policy framework announced by the Bank of Japan (on Wednesday)”, an official of a major Japanese bank said.
