The central bank characterized the near-term risks to its economic outlook as “roughly balanced”.
Advertisement
And perhaps most critical for some Fed officials, inflation has yet to make significant progress in rising toward the central bank’s 2 percent target range. And Yellen thinks that’s kept the unemployment rate at 4.9 percent despite robust job growth.
In recent weeks, several Fed members have outspokenly championed a near-term rate hike despite uneven USA data and questions over the health of the global economy.
“Since monetary policy is only modestly accommodative, there appears little risk of falling behind the curve in the near future, and gradual increases in the federal funds rate will likely be sufficient to get to a neutral policy stance over the next few years”. The euro had popped up to $1.1190 EUR=, while the dollar index stood at 95.499.DXY after easing 0.5 percent from a more than six-week high of 96.333.
The Fed has policy meetings scheduled in early November and mid-December. “It seems clear that barring a major setback a rate hike is coming before the end of the year”. But the Fed’s board was split and the decision came as three members of the 12-strong panel voted to raise rates this month.
“The first phase of a gold run, which is largely driven by the Fed’s inaction to raise rates, is over”.
Looking ahead, investors will be watching out for US employment data later Thursday, something that could trigger market tremors if the data offers clues as to the likelihood of a December rate increase by the Fed. But with lowered expectations for an imminent rate hike, the spread, or gap, between 2- and 10-year muni bond yields fell from 1.086 percent to 1.024 percent, its lowest level since July 8.
Lee Ferridge, head of multi-asset strategy, North America at State Street Global Markets, said: “As widely expected the FOMC left rates unchanged on Wednesday but did attempt to lay the groundwork for a move before year-end”. Some analysts thought the central bank would take further steps to bolster economic growth.
The yen rebounded on Wednesday, with investors skeptical about whether the Bank of Japan’s latest measures will be enough to generate inflation and many also cautious about the dollar before the Federal Reserve policy announcement.
The 10-year U.S. Treasuries yield dropped to as low as 1.608 per cent, down sharply from Wednesday’s high of 1.738 per cent and hitting its lowest level in nearly two weeks.
“It is becoming clear that central banks around the world see themselves supporting the economy with loose monetary policy while governments remain slow with fiscal reform”, said Lorne Baring, managing director at B Capital Wealth Management.
In other energy trading, wholesale gasoline rose 3 cents, or 2.5 percent, to $1.40 a gallon. Homebuilders had slumped Tuesday after the US government said construction of new homes slowed down in August. The S&P 500 gained 0.46 percent, with energy leading advancers and the Nasdaq composite traded about 0.2 percent higher. Eastern time on Friday, down a notch from last week’s close of 1.876 percent, and further off its high of 1.886 percent earlier in the week.
Advertisement
China stocks have stepped back, failing to build on robust gains the previous day as many investors sat on their hands before the long National Day holiday that begins on October 1.
