They said they expected Japan’s central bank to eventually slash its policy rate further.
Advertisement
The “dot plot”, part of the FOMC’s Summary of Economic Projections released along with the policy decision statement, shows where each participant in the meeting thinks the fed funds rate should be at the end of the year for the next few years and in the longer run.
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. Citigroup (C) climbed 0.8%, and Morgan Stanley (MS) added 0.7%.
Investors were inclined to stay their hand yesterday until they hear the decision from the United States Federal Reserve on interest rates, with most tipping that there will be no rise this month. See more details about which bank stocks might be in buy range. Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren even dissented on the decision to stay put.
The statement added that “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run”.
“Against this backdrop, the committee chose to maintain the target range for the federal funds rate at 0.25 per cent to 0.50 per cent”.
The Fed chose to leave interest rates unchanged on Wednesday, in a predictable decision that indicates improvements in the economy, but not enough strength to bear higher borrowing costs.
The Dow Jones Industrial Average rose by 100 points after the announcement, at 6am New Zealand time. But low interest rates also encourage businesses to borrow more money, which should mean they’re more likely to invest in new projects and hire more people, which can lift the economy as a whole.
The 10-year yield on the AP Municipal Bond Index was 1.863 percent as of 5 p.m.
“I can say emphatically that partisan politics plays no role in our decisions about our stance regarding monetary policy”. The central bank said the argument for raising rates has “strengthened” recently.
“Most people were expecting some version of this, the idea that they weren’t actually going to hike rates but they didn’t want the notion that the Fed is never going to hike”, said Lewis Alexander, the chief USA economist at Nomura.
Despite Wednesday’s inaction, the Federal Reserve still expects to raise interest rates before the end of the year – a position the central bank has maintained since the start of 2016. At the very same time, the Fed lowered the long-run outlook for inflation growth and interest rates.
However, as the Fed’s statement notes, unemployment remains relatively low and inflation continues to fall under its target of 2 percent, where it has mostly remained since the Great Recession.
Advertisement
Shares of FedEx jumped, up 6.8 per cent as of 3.08pm in NY, after the shipping company upgraded its full-year earnings forecast, and offered an upbeat outlook on the impact of its acquisition of TNT Express.
