Federal Reserve said Monday that the feeling among policymakers in the central bank is that there’s no rush to raise interest rates at its meeting later this month.
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The Federal Open Market Committee, the Fed’s monetary policy arm, is set to meet on September 20-21.
South Korea’s Kospi rose 0.5% and Australian stocks advanced 0.3%.
Since the impact on inflation of further improvement in the labor market is likely to be moderate and gradual, “the case to tighten policy preemptively is less compelling”, she said according to the pre-released text of a speech for delivery at the Chicago Council on Global Affairs. “The market right now is battling with the timing and how likely it is that they get a hike off this year”, said Aaron Kohli, an interest rate strategist at BMO Capital Markets in NY.
“I think circumstances call for a lively discussion next week”, Atlanta Fed President Dennis Lockhart, who will not be a voter at next week’s policy review, told Reuters.
Fed governor Daniel Tarullo also said last week that USA inflation should pick up “in a sustainable way” to be at the central bank’s target of 2 percent rather than being below the target before Fed raising rates again. Last Friday the index had fallen 2.45 percent, its worst day since the Brexit announcement. “Market participants are wondering if maybe she (Brainard) is being wheeled out to give the market one last warning of a rate hike at next week’s meeting”, said Marshall Gittler, head of research at broker FXPRIMUS.
In New York, the Dow Jones industrial average gained 191.82 points at 18,277.27, while the broader S&P 500 index climbed 25.81 points at 2,153.62.
European stocks slid Monday, with investors fleeing risky assets as the markets confronted the prospect that interest rates will be raised in the USA this month.
Goldman Sachs also further cut its view on the likelihood of a rate hike next week, dropping it to just 25 percent from 40 percent after the final round of Fed speakers on Monday. The days of rapid growth are over in the wake of the Great Recession, she said.
The local currency traded at 73.39 United States cents at 5pm in Wellington from 73.50 cents at 8am, up from 73.17 cents yesterday.
Persistently muted increase in prices and wages “suggest some reasons to be concerned more about undershooting than overshooting” the Fed’s 2 percent inflation target.
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Investors had been re-thinking the chances of the Fed moving as early as next week after a series of central bank officials appeared to favour such a move. Asian stocks were mostly higher on Tuesday after a Federal Reserve board member said she was in no hur.
