“Given the progress we’ve made and continue to make on our goals, I view the next appropriate step as gradually raising interest rates, most likely starting sometime later this year“.
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Later in the session, Atlanta Fed President Dennis Lockhart said that the six weeks until the Fed’s next meeting in October may not be enough time to quell concerns about the global economy and possible risks to the United States recovery.
Yang Ling, president and chief strategist at Star Rock Investment in Beijing, said the Fed’s decision to hold interest rates steady was good for China because it reduced pressure on the yuan to weaken further and on capital outflows from China.
While Rieder applauded the Fed’s transparency overall, he said it would be helpful to the markets if the agency would be more specific about what series of metrics it looks at, whether it be the jobless rate or apartment rental vacancies rate. “The base case scenario (for a Fed hike) has now moved to December and there’s a lot of commentary that they may have to wait for 2016″.
The dollar touched an nearly two-week high against a basket of major currencies after the comments revived expectations that USA interest rates will still be hiked later this year. On Thursday, just at the moment the Federal Open Market Committee announced it had chose to leave rates unchanged, the yield on the 30-year bond was 3.09% – a full 86 basis points, or 38%, higher than it was at the January low. Trading in federal funds futures indicates a 20 percent probability of a rate increase at the October 27-28 FOMC meeting and 49 percent chance of an increase by the gathering on December . 15-16.
The market is waiting to hear from Fed Chair Janet Yellen, who is due to speak on Thursday.
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“As things settle down, I will be ready for the first policy move on the path to a more normal interest-rate environment”, Lockhart said.
The Nasdaq Composite lost 67 points, or 1.4%, at 4,761.
The Fed’s twin objectives for its monetary policy are to achieve maximum employment and stable inflation, which it targets at 2 percent.
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Of course, a steep fall in global markets following the Fed’s rate decision and wide criticism has contributed to this change of opinion among Fed officials, but it has also painted the Fed as being dictated by market’s whims.
