The Federal Reserve decided Thursday to keep interest rates at record lows, citing low inflation, weakness in the global economy and unsettled financial markets.
Advertisement
And we finance nerds are going into Fed Watch mode…officials at the US Federal Reserve, are gathering for a two-day meeting starting Wednesday in Washington.
However, continued encouraging news on U.S. employment, low gasoline prices and the publication of several upbeat economic indicators led other economists to believe that the Fed would act to raise rates this month.
Of the 17 Fed officials at the meeting, 13 indicated they expect a rate hike by the end of this year, majority pointing to a 0.25-0.50 percent range.
Even if there’s a press conference, there won’t be a new Summary of Economic Projections outlining where the Fed sees economic growth, inflation, and the unemployment rate. The Standard & Poor’s 500 index fell 5.11 points, or
0.3 percent, to 1,990.20, and the Nasdaq composite index rose 4.71 points, or
0.1 percent, to 4,893.95.
The core personal consumption expenditure (PCE) price index, an inflation gauge preferred by the Fed, only went up 1.2 percent year on year in July, far below the central bank’s 2 percent.
“The delay in monetary policy tightening by the Fed creates potential for a subdued dollar performance in the near term”, said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank.
Fed Chair Janet Yellen kept interest rates on hold Thursday and sounded caution over slowing growth in China.
However, she said “heightened uncertainness abroad” and slow inflation had convinced the committee to wait for more evidence, including continued job growth, “to bolster its confidence”.
“We’ve seen significant outflows of capital from those countries, pressures on their exchange rates and concerns about their performance going forward”.
Equity markets have been turbulent amid concerns about a China slowdown and the Fed’s intentions.
Gold was trading near its highest in a week yesterday, adding to overnight gains from its biggest jump in nearly a month, as sluggish United States inflation data eased the fear the US Federal Reserve would hike interest rates later this session. Apple was down 1 per cent at $112.73, while Netflix fell 2.7 per cent to $101.63. Britain’s FTSE 100 dropped 0.6 percent to 6,153.03.
Advertisement
Most traders had expected the markets to breathe a sigh of relief if the Fed held on interest rates this week, but its statements on the economy may have been too pessimistic and spooked the markets.
