Overall, it has become increasingly likely that the unswervingly cautious Fed will continue to postpone another rate hike until significantly later in the year, at best. Stocks traded about where they were before the statement was released at 2 p.m. As she has often said, the decision will be data dependent.
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The Federal Reserve’s next big policy event is on Wednesday. Bank of Japan officials, who started their own two-day policy meeting, will also be awaiting the Fed’s review and its effect on the markets.
At the end of its two-day meeting at 2 p.m. ET, the Janet Yellen-led Fed will issue a policy statement on interest rates and provide a glimpse into the central bank’s current views on the health of the US economy and risks from overseas.
Meanwhile, West Texas Intermediate crude oil futures were down 1.2% to $47.91 per barrel; on Tuesday, the American Petroleum Institute reported an unexpected build in inventories. “It is a decision that could have consequences for economic and financial conditions in global financial markets”, she said.
But the momentum indicator RSI has been trending lower at the overbought levels of around 70 in recent days, suggesting that rally has run out of juice – which the Fed could replenish tonight if it delivers a more dovish-than-expected policy statement and economic projections. And it projected that it would raise rates four more times in 2016.
In particular, worries that the United Kingdom could quit the European Union in the wake of a referendum on the matter on June 23 has been the source of much of the market’s consternation.
But this month, the government caught the financial world off guard when it said employers added just 38,000 jobs in May the weakest gain in five years and that job growth averaged only 116,000 the past three months, down from 230,000 for the 12 months ending in April. Wholesale inflation data showed core prices – those with volatile fuel and food stripped out – declined 0.1 percent last month.
Besides issuing a policy statement, the Fed updated its economic forecasts, which show how it foresees rate hikes unfolding in coming months.
“As I said, we have good reason to believe that the so-called neutral rate or rate compatible with the economy operating at full employment is low at the present time and many of us believe as a base case it’s reasonable to assume that those rates will move up over time”.
The New Zealand dollar jumped after the Federal Reserve kept interest rates unchanged and signalled the pace of future increases will be slower than previously expected.
And inflation remains below the Fed’s target. A vote on June 23 by Britons to leave the European Union “could have consequences in turn for the USA economic outlook”, she said.
Nearly an hour into the trading day and all major US indexes are rising strongly.
In other words, even if the Fed had tried to raise short-term interest rates, it probably wouldn’t have done much good for longer-term debt.
Corporates:Cisco Systems Inc.(CSCO) shares fell 1.7% after analysts at Goldman Sachs downgraded the stock rating to neutral from buy.
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The benchmark DJ Stoxx Europe 600 index was up by 0.97% or 3.10 points to 323.63, Germany’s DAX was 0.92% or 87.51 points higher at 9.606.71 and France’s CAC 40 was 1.0% or 41.25 points firmer at 4,171.58. The euro, on the other hand, fell against the safe-have yen, which has been bolstered recently on mounting Brexit fears.
