The Federal Reserve made a decision to keep interest rates unchanged once again this month, but said “near-term risks to the economic outlook have diminished”. In the eight weeks between this week’s meeting and the next in September, the Fed will see a flurry of fresh economic data, including two monthly jobs reports.
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There are three more Fed policy meetings left this year – September, November and December.
USA central bankers are taking stock of the economy’s progress in the wake of the United Kingdom’s vote last month to leave the European Union, as well as the large swing from May’s soft labor report to June’s rebound.
“The Fed seems intent on telling the markets that a September hike is a possibility”, Peter Boockvar, chief market analyst at the Lindsey Group, emailed. The Fed’s assessment of global risks on Wednesday indicated officials’ concerns about Brexit-related financial strains had diminished in the short term; however, they still see lingering threats from Europe in the medium to longer run.
The next big event on the Fed’s calendar: Yellen is scheduled to speak at an annual policy conference in Wyoming in late August.
Stock averages posted a modest increase Wednesday after the statement was issued at 2 p.m. Eastern time, before drifting lower later in the afternoon. Kansas City Federal Reserve President Esther George voted against the action, citing a preference for a 25 basis point increase.
Aguero described the Fed as being “patient” in their approach to raising the rate. Relatively high USA rates strengthen the dollar, hobbling US exports and the economy.
The Fed also painted a generally positive portrait of the USA economy. In June, employers added 287,000 jobs, the most since October 2015.
The Fed’s preferred inflation rate now stands at 1.6 percent and has been below target for more than four years. But as 2016 began, intensified fears about China’s economy and a plunge in oil prices sent markets sinking and led the Fed to delay further action. Yellen said an interest rate hike would be a good move this year depending on the economy’s strength and jobs market.
Helped by the airplane maker’s results, S&P 500 companies’ aggregate earnings are now expected to decline 3.0 percent for the second quarter, compared with the 3.5 percent decline expected a day ago, according to Thomson Reuters I/B/E/S.
Sweet said if the economy performs as expected, “tighter monetary policy this year will be warranted”. In the spring, consumers boosted spending to what could be the fastest pace in a decade.
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Dr. Stephen Miller, a UNLV economics professor and director of the Center for Business and Economic Research, said he had mixed feelings about the prospect of the Fed raising rates.
