The BoJ also loosened its annual asset-buying target – a key feature of its more than three-year-old policy – saying the target could instead fluctuate to give it flexibility while focusing on keeping bond yields steady. In the past year, market volatility and Brexit have given the Fed pause. Inflation also showed signs of stirring last month.
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Australia’s “Big Four” banks were up by between 0.4 percent and 0.9 percent.
USA stocks jumped about one percent, with the Nasdaq finishing at a new all-time high of 5,295.18, up about 12 points from the previous record on September 7. Fed chief, Janet Yellen, said the economy can still grow at the current rate.
In a statement following a two-day policy meeting, the Fed said it could tighten monetary policy by year-end if the labour market had improved further. “That’s what is pushing the market higher”.
Yellen made clear, however, that any interest rate rises in the future would be gradual and monetary policy would remain accommodative.
The Federal Reserve kept its benchmark interest rate unchanged for the sixth straight meeting Wednesday, saying it needs to see a bit more sign of strength in the U.S. economy. “This is supportive of rates in core emerging markets, and lowers the hurdle for emerging market central banks to ease policy”, Citi analysts said in a note.
Miners led the European stock market higher as the Fed’s decision to keep rates unchanged pushed down the U.S dollar on currency markets, thereby making commodities cheaper for holders of other currencies.
Brushing aside present politics, Yellen replied that “investment spending has been weak for some time and we are not certain what is causing that”. The rupiah’s gain of more than 5 percent against the dollar this year was another good reason for BI to cut, economists say. The “conventional wisdom” was that, after the financial crash and the Great Recession which followed, stimulatory measures by central banks in the USA and worldwide would restore economic growth close to its previous path. Growth rates are mostly on the low side of reasonable, official rates are above zero and inflation is running below targets.
On Wednesday, Bank of Japan chose to adopt a target for long-term interest rates in an overhaul of its massive stimulus programme. She said the Fed will monitor whether that approach creates more risk for the world’s financial stability.
At the same time, policymakers cut the number of rate increases they expect this year to one from two previously, according to the median projection of forecasts released with the statement.
These remarks, in the context of a discussion of a possible 0.25 percent rise in the federal funds rate, point to real fears.
Dairy giant Fonterra Co-operative Group Ltd nudged 0.2 percent higher after reporting an increase in its full year net profit despite challenges in global dairy markets.
Slow and slowing growth is a global problem-especially in the world’s third largest economy, Japan. Caixabank shares were down 2.4 percent.
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It lowered its USA growth forecast for 2016 to 1.4 percent, from 1.8 percent and cut the forecast for Canada from 1.7 percent to 1.2 percent, and marginally lowered its projection for global growth to 2.9 percent.
