“The reason behind the Fed not raising rates is due to problems in the emerging markets”, said Aslam.
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A number of officials argued that a rate increase could convey confidence to the world about the economic outlook and that the Fed needed to move in acknowledgment of the progress the economy had already made toward normalcy.
Markets on Wednesday took the tone of the July 28-29 meeting as a sign that the central bank was less likely to begin hiking interest rates in its September meeting. However, policy makers also expressed concerns about recent drops in commodity prices and said inflation is still too low to justify an interest rate increase.
The FOMC, as widely expected, held unchanged at the July meeting the Fed’s benchmark federal funds rate at the zero level, where it has been pegged since late 2008 to help support the US economy’s recovery from the severe 2008-2009 recession. The institution mentioned that it wants to be “reasonably confident” in the inflation outlook before deciding to raise rates.
Japan’s Nikkei fell 0.3% in early trade while MSCI’s broadest index of Asia-Pacific shares outside Japan was nearly flat, barely holding above its two-year low hit on Wednesday for now.
Since then, the situation in China has grown more worrisome.
Buoyant stock and currency markets after yuan’s devaluation have also set off a flight toward gold, which is seen as a safe store of value.
Much of the market reaction hinges on the Fed’s concern about particular areas of the U.S. economy, including the discussion of the effects of deflationary forces from commodities and the strong dollar.
Spot gold rose as far as $1,141.75 an ounce, its loftiest since July 17, and was up 0.4 per cent at $1,138.50 by 0619 GMT (11:49 a.m.in India).
The uptick in inflation was slightly lower than analyst forecasts of 0.2pc, and will give the Federal Reserve “pause for thought” over a September rate rise, said Paul Ashworth, chief US economist at Capital Economics.
The US dollar bought 123.86 Japanese yen, lower than 124.39 yen of the previous session, dived to 0.9655 Swiss franc from 0.9782 Swiss franc and surged to 1.3107 Canadian dollars from 1.3059 Canadian dollars.
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At their July meeting FOMC members “generally anticipated that inflation would rise gradually toward 2 per cent as the labour market improved further and the transitory effects of earlier declines in energy and import prices dissipated”, the minutes said.
