A statement following the two-day meeting of the FOMC said that the labor market perked up in June after a disappointing May, and household spending is increasing.
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Arguing that near-term risks to the United States economy have diminished, at its latest meeting the Federal Reserve chose to hold steady and not raise USA interest rates for at least another two months.
It did say, however, that near-term risks to the USA economic outlook had diminished, opening the door for a potential near-term hike in the eyes of many. “On balance, payrolls and other labor market indicators point to some increase in labor utilization in recent months”.
This is the fifth consecutive meeting in which the Federal Open Market Committee (FOMC) has left the rates unchanged in the light of the global economic concerns after raising them by 25 basis points for the first time in a decade in December, 2015. Business investment remains weak, however, and inflation hasn’t moved up much and continues to run below the 2 percent annual target.
Gold futures for December delivery advanced 0.5% to settle at $1,334.50 an ounce at 2 p.m. on the Comex in NY, the first consecutive gain in a week. However, it did keep in the statement that it would continue to monitor financial conditions.
“In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation”.
Labour market is Fed’s saviour: After the shock of May, US labour market came back with a bang in June, as job gains surpassed even the most optimistic estimates on Wall Street.
Markets don’t take the Fed seriously: Those in the financial markets seem to have stopped taking the Fed seriously.
“The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction, and it anticipates doing so until normalization of the level of the federal funds rate is well under way”.
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Once again, the lone dissenting voice in the vote was Esther George, president of the Federal Reserve Bank of Kansas City, who wants to see rates increased immediately.
