The Fed last hiked in December, its only move higher in a decade.
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A divided Federal Reserve left its policy interest rate unchanged to await more evidence of progress toward its goals, while projecting that an increase is still likely by year-end.
The Fed said US economic activity had picked up and job gains were “solid” in recent months. “Household spending has been growing strongly but business fixed investment has remained soft”.
Indonesia’s central bank on Thursday cut its benchmark interest rate for the fifth time this year, in line with expectations.
The Fed raised the rate a quarter percentage point in December after holding it near zero for seven years in an unprecedented attempt to stimulate the economy during and after the Great Recession.
“Our decision does not reflect a lack of confidence in the economy”, said Federal Reserve Chair Janet Yellen during a post-meeting press conference. The greenback later pared some losses and was last trading at 100.25 yen, down 0.1 percent on the day.
In a passionate defense of the Fed, Yellen said the central bank is “not politically compromised” and that she was giving her personal “commitment to the American people” that she vows “to lead an institution that’s not political”. “Any nasty political shock or any signs of further weakness in the economy could delay the next interest rate increase even longer”.
The FOMC kept interest rates unchanged at 0.25-0.5 percent as widely expected but the policy board laid down the groundwork for an increase in the coming months.
The dollar which rose more than 1 percent to a one-week high of 102.79 yen gave up some of its gains in the European session to trade at 102.05 yen after BoJ Governor Haruhiko Kuroda said the Japanese economy was no longer in deflation.
Indeed, the Reserve made clear in updated forecasts that it expects growth to remain tepid for the next three years. It expects the economy to expand just 1.8 percent this year and by an nearly equally sluggish 2 percent in both 2017 and 2018.
One weak spot was Jabil Circuit, which dropped almost 6 per cent to US$22.34 after the contract electronics maker said it meant to realign its business at a cost of US$195 million over two years.
For the first time since Yellen became Fed chair in February 2015, there were three dissents to the Fed’s statement.
“This seems to have been one of the most divisive FOMC meetings in recent memory”, Ashworth said.
The consensus among economists is for a hike in December as the Fed’s November meeting comes right around the US Presidential elections. In a new round of economic projections published Wednesday, Fed officials predicted that the central bank’s benchmark rate would rise to 1.9 percent by the end of 2018, well below their March prediction that it would reach 3 percent by the end of 2018. They believed that the Fed, starting with a late-August speech by Yellen in Jackson Hole, Wyo., was preparing investors for an imminent increase. Fed policymakers chose to keep the federal funds rate in a range between one-quarter and one-half percent.
The Virginia-class USS North Dakota (SSN 784) submarine is seen during bravo sea trials in this U.S. Navy handout picture taken in the Atlantic Ocean Aug. 18, 2013.
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Markets across Asia rallied as risk assets won favour again in light of the gradual approach to raising interest rates, and the prospect of only modest rises in the future.
