Robin Anderson, senior economist at Principal Global Investors, said there continues to be a disconnect between the Fed’s projections for the interest rates and for the market’s expectations.
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While recent economic data has raised the chances of a U.S. rate increase, some analysts caution that Greece’s unresolved debt woes and turmoil in China’s financial markets may worsen, forcing the Fed to postpone a rate hike in September. That’s well below the 3.5% rate that’s usual for a healthy economy.
There have been solid job gains and declining unemployment, and the underutilization of labor resources has declined since earlier in the year. He expects that to occur in September.
The policy could prove important for emerging market currencies, which risk losing value once the Fed finally does raise rates. The idea is to avoid weakening an economy that’s benefiting from low borrowing rates resulting from the Fed’s policies.
The Fed has held the federal funds rate near zero since December 2008. This factor has slowed the Fed down in the taking of a decision.
“We’ve had some good earnings reports today and transports stocks are rising for the second day in a row, no doubt thanks to UPS profits”. On Wall Street, futures for the Dow Jones industrial average and Standard & Poor’s 500 both flat.
The statement was approved on a 10-0 vote, marking the fifth straight time it has been unanimous.
Earlier this month, Yellen told Congress: “Our economy is in a much better state”. More important, inflation continued to run well below the Fed’s 2% annual target.
And while the unemployment rate, at 5.3 per cent, is almost normal, other gauges of the job market remain less than healthy.
This story was first published on CNN.com, “Fed: Prepare for likely interest rate hike in 6 weeks”. “The hurdle for hiking interest rates is fairly low as long as there is a few indication that inflation is going to be stable to higher going forward”.
The Fed is closer to achieving its other main goal: maximizing employment.
Gold fell more than 1% on Thursday, trading close to a five-and-a-half-year low hit last week, as the dollar jumped after the US Federal Reserve left the door open for a rate rise in September and ahead of US gross domestic product (GDP) data.
Bullion is set for a 7.4 per cent plunge this month, the most since June 2013, after tumbling to the lowest level since 2010 last week.
She has also said that when rates do begin to rise, the increase will only be gradual.
In the statement released after the meeting, the FOMC said it expected economic activity to expand at a moderate pace, with “appropriate policy accomodation”.
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With two jobs reports to come before that meeting, as well as key evidence on wages and prices, policymakers want to watch the numbers before committing themselves.
