The Eccles Building in Washington D.C. houses the Bord of Governors of the Federal Reserve System.
Advertisement
Gold prices are reacting to the fact that the central bank committee has reduced its medium and long-term interest rate expectations.
That reflects growing concern that the Fed is waiting too long to raise rates. But the vote wasn’t unanimous.
However three of the Fed’s rate-setters dissented, voting in favour of an increase. Yellen even said the case for a rate increase has “strengthened”.
“The Fed appears to be firmly on track for a December hike”, Paul Ashworth, chief U.S. economist at Capital Economics, said after the statement was issued.
The New Zealand dollar slipped to as low as $0.7316 earlier on Thursday, but later regained its footing and was last trading at $0.7362, up 0.2 percent from late US trade on Wednesday.
The New Zealand dollar is up by 0.3% to 0.7317 against U.S. dollar after the country’s reserve bank held its key rate at 2.00%, as expected.
“US Fed leaves rates unchanged.Decision on expected lines”, Economic Affairs Secretary Shaktikanta Das tweeted. The S&P 500 Index gained 1.1 percent to 2,163.12, the most on a Fed day since December, when it raised rates for the first time in a decade and the market ended 1.5 percent higher.
At the beginning of this year, its leaders projected raising rates four times – but that hasn’t happened either.
The New Zealand dollar edged lower after the Reserve Bank of New Zealand (RBNZ) left the door wide open for another interest rate cut this year.
Yellen also pushed back against criticism that the Fed is losing any credibility, arguing that it’s good all Fed officials don’t have the same opinion and there’s a range of voices. Although he has previously said he supports her policies, the Republican nominee said in April that he would replace Yellen if elected president. For 2018, it expects the unemployment rate to fall to 4.5%, down from the previous forecast of 4.6%. Most analysts said they believe the Fed will next raise rates in December.
Until recently, many Fed watchers had thought that a rate increase was likely this week.
Aside from the potential for Monday’s USA presidential debate having a big impact on the election, “there’s really nothing on the horizon until earnings season, and the Fed has kind of cleared the way for accommodative policy and low interest rate environment which bodes well for stocks”, said Alan Lancz, president of investment advisory firm Alan B. Lancz & Associates in Toledo, Ohio.
Advertisement
While the FOMC does have a meeting at the beginning of November scheduled, it is regarded as highly unlikely it would take action within a few days of an election, meaning December is now considered the earlier point a raise could come.
