The Reserve characterized risks to its economic outlook as “roughly balanced”. While it acknowledged that economic activity has picked up and that job gains were “solid”, the Fed made a decision to wait for more progress before hiking rates.
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The decision means the Fed’s main target rate is held in a range of 0.25% to 0.5%.
Fed officials also indicated that they still expect interest rates to rise by year’s end, although not as quickly as they had previously expected.
But Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren all voted against the policy statement, saying they preferred to raise rates at this meeting. In the bond market, US Treasury yields rose ahead of the Fed decision.
Fed Chair Janet Yellen said on Wednesday that USA growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation. Yellen and the Fed’s policymaking committee cited inflation as one of the reasons why it did not hike rates at its September meeting. It was the first time it has used that wording since late previous year, when it last raised rates. The Fed kept its growth outlook for the US economy unchanged at 2% for 2017 and 2018 buit did lower its forecast for 2016 to 1.8% from 2%. Three of the 17 policymakers said rates should remain steady for the rest of the year.
The Fed’s next meeting is just a week before the November elections, and most analysts think it wouldn’t want to raise rates so close to when voters go to the polls. Conditions in the labor market are strengthening and while inflation is low we continue to expect to see it rise to our target of 2%’. Eastern. The Standard & Poor’s 500 index rose 15 points, or 0.7 percent, to 2,178 and the Nasdaq composite rose 30 points, or 0.6 percent, to 5,325. Investors are now looking ahead to the release next week of a raft of economic data, such as monthly USA consumer confidence and durable goods orders and Chinese factory activity, for the latest insights on the world economy’s health.
The major gainer against the dollar was the Norwegian crown, which rose more than 2% after Norway’s central bank left its main interest rate unchanged and suggested further rate cuts may not be needed because of a pickup in the economy.
But he called the Fed statement in its whole “unambiguously more hawkish than in July”, predicting a hike in December.
Investors did not appear to significantly shift their bets on the timing of the next rate hike. All wanted the Fed to raise its key rate at this meeting. Copper, platinum and palladium each rose 2 percent.
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About 74 percent of 62 economists surveyed by The Wall Street Journal this month believed that the Fed will wait until December 13-14, the Fed’s final meeting of this year, to raise rates.
