Household spending had grown strongly and the labor market had also strengthened since the June meeting.
Advertisement
Many policymakers have urged caution on raising rates as the country’s economy continues to recover. The committee said Wednesday it still expects “gradual” adjustments in monetary policy. The longest-maturity Treasuries led the rally as the Fed said market-based measures of inflation compensation “remain low”.
The Federal Reserve left key interest rates untouched Wednesday, July 27, but acknowledged improved economic performance, suggesting a rate increase may still be on the horizon in 2016.
Analysts are skeptical about the Fed’s next move after it chosenot to change interest rates in July, leaving its benchmark federal funds rate in a range of 0.25 percent to 0.50 percent.
That was scaled back to two hikes this year after central bank policymakers issued new projections in which they also lowered their longer-term growth estimates for the USA economy.
The statement “suggests that while the balance of risks has shifted to the upside, the Fed is still extremely cautious about any knock-on effects from sluggish global growth and Brexit”, said Gennadiy Goldberg, an interest-rate strategist in NY at TD Securities (USA).
There are three more Fed policy meetings left this year – September, November and December.
The FOMC vote was almost unanimous, with only Kansas City Fed President Esther L. George advocating an increase in the federal funds rate to one-half to three-quarter percent.
Fed leaders decided not to increase rates on Wednesday after uncertainty following the United Kingdom vote to leave the European Union, also known as Brexit, and a shockingly weak May jobs report. That poses a conundrum for the Fed, which has attempted to keep the USA dollar from strengthening too much as to drive away investment, while keeping the economy on a path to growth.
Shares of Boeing BA.N rose 1.1 percent after the company reported a much small-than-expected loss in its core quarterly results.
Bond yields were also marginally lower. US stocks extended declines before later reversing course to trade largely flat in the session.
“Markets had been slowly pricing in a higher likelihood of a rate hike by the year-end and have returned to pre-Brexit expectations in recent day, Rob Carnell, chief financial economist at ING, told The Financial Times”.
Advertisement
The euro was also higher against the pound, with EUR/GBP climbing 0.55% to 0.8409.
