Wall Street rose on Wednesday, with the Nasdaq closing at a record high as the rate decision whetted investor appetite for equities. Investors doubt the Fed will take action in November, when it meets right before the presidential election, but they think there’s a good chance rates will rise in December. Market pricing for a December move rose only a fraction to 59.3 per cent, from 59.2 per cent, according to CME Group’s FedWatch tool.
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While Fed chair Janet Yellen suggested United States borrowing costs could rise this year, policymakers cut the number of rate increases they expect this year to one from two and projected a less aggressive rise in rates both next year and in 2018. Copper, platinum and palladium each rose 2 percent.
At 10:00 a.m., existing home sales is expected to increase to 5.44 million in August from the 5.39 million level seen in July.
While the immediate volatility following the collective influence of the Federal Reserve and Bank of Japan rate decisions was restrained, the fundamental influence to the system is particularly weighty.
European markets followed Asia’s lead, with Britain’s FTSE 100 climbing 1.3 per cent and Germany’s DAX and France’s CAC 40 both jumping nearly 2 per cent ahead of what was expected to be a third day of gains in NY.
Japan’s central bank opted yesterday to keep its monetary easing strategy mostly as is, while tweaking its asset purchases to push yields on long-term government bonds higher.
Fed officials also cut their median growth projection for 2016 to 1.8 percent from 2 percent, mirroring the drop in the longer-run forecast, based on median estimates.
Investors were surprised earlier this month when Fed official Eric Rosengren, who has been reluctant to raise rates, suggested he might be willing to raise rates this month.
Some expected that a rate hike would be announced this month, but today’s meeting confirms that the reserve bank is likely to wait until December to officially change pace. Now it is down to just three.
Yellen agreed that the case for an increase in rates was stronger, but that not only was the economy not “overheating” now, but there was actually a “little more room to run”.
Until recently, many Fed watchers had thought that a rate hike was likely this week. There’s also evidence that threats to USA growth from global instability have eased.
Dissent is growing among members of the Federal Open Market Committee as America’s central bank again made a decision to pass on raising its benchmark interest rate.
At the policy review, the Japanese central bank refrained from pushing its benchmark rate further into negative territory, maintaining the rate it applies to the excess reserves held by financial institutions at the central bank. It touched a six-week high of 96.333 on Wednesday, before ending the day down 0.4 per cent from its previous close. Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labor market strengthens further.
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Another supportive factor was an oil workers’ strike in Norway, which threatened to cut North Sea crude output. Brent crude, used to price worldwide oils, rose 64 cents, or 1.4 percent, to $46.52 a barrel in London. Over half of the main emerging economies are commodity producers. Amgen lost 46 cents to $172.92 while Alexion Pharmaceuticals gave up $2.10, or 1.6 percent, to $129.63.
