The Fed’s next meeting takes place mid-September. Federal interest rates remain unchanged at 0.25% to 0.5%.
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Esther George, president of the Federal Reserve Bank of Kansas City, voted for a quarter-point increase in the Fed’s benchmark rate.
Fed Chairwoman Janet Yellen has won broad support among Fed officials for a patient approach to raising rates.
Jim O’Sullivan, chief United States economist at High Frequency Economics, wrote in a note to investors, “We continue to expect the next tightening move to be in December”. But uncertainty about the global economic consequences of Britain’s exit from the European Union remains.
The policy-setting committee will also meet at the beginning of November, but a rate hike at that time is generally seen as unlikely because it would occur a week before the USA presidential election.
Japan’s prime minister unveiled a surprisingly large $265 billion stimulus package on Wednesday, adding pressure on the central bank to match the measures with monetary stimulus steps. And the Fed is signaling that things are looking better. But some analysts who had doubted that the Fed would be ready to raise rates as soon as September said Wednesday’s statement appeared to revive that possibility.
Crude oil extended losses after suffering big hits overnight on renewed concerns about oversupply.
The economy is also picking up after the year’s anemic start. Household spending have grown “strongly”. In the spring, consumers boosted spending to what could be the fastest pace in a decade. Before the meeting, markets gave just 20% odds of a September rate increase. McBride said, “Waiting too long leaves the Fed with insufficient tools to combat the next economic slowdown or recession”. Job gains were strong in June following weak growth in May. Yet the central bank also noted that business investment remained “soft”.
The Fed noted that inflation expectations were on balance little changed in recent months.
The committee blamed low energy prices for weighing on inflation.
Near-term risks to the economic outlook have diminished. Since the Fed’s meeting in June, “the labor market strengthened and…economic activity has been expanding at a moderate rate”.
Australian stocks .AXJO added 0.2 percent and South Korea’s Kospi .KS11 rose 0.1 percent.
Here’s the bottom Line: Given the still-lingering, albeit diminished, potential downside risks to the Fed’s internal forecast for further improvement in the labor market and inflation coupled with recent market-moving events overseas, the committee faces no sense of urgency to further adjust policy. However, it did keep in the statement that it would continue to monitor financial conditions.
The Federal Reserve is keeping its feet on the brakes when it comes to raising the federal funds rate.
The measurement used by the central bank lists current United States inflation at 1.6% and it has hovered below the Fed’s target since 2012.
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Wall Street was left to digest the Fed’s latest decision without the color of a scheduled press conference by Chief Janet Yellen.
