Bank Indonesia (BI) says it will prepare an easing monetary policy, especially after the US Federal Reserve sent a strong indication that it would not raise its benchmark rate this year. Six weeks ago, the Fed said the global slowdown “may restrain”, the USA economy. The fact that previously issued statements of caution about the risks that global financial and economic developments posed to the USA economy have been dropped from the current statement has been seen as suggestive of a December rate rise by a few analysts.
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In its statement, the Fed seemed to indicate that a rate hike remains a possibility at its next meeting in December.
The Fed held rates at historic lows of between zero and 0.25 per cent on Wednesday night but signalled there could be a hike at its next meeting in December. After the September meeting, Yellen noted that 13 of 17 Fed officials expected the first rate hike to occur this year. But it will be harder for the Fed not to follow through and keep rates unchanged without seeing lower inflation and growth in jobs.
The FOMC expressed confidence that inflation will move up toward its 2.0 percent target “as the labor market improves further and the transitory effects of declines in energy and import prices dissipate”.
The FOMC has remained tight lipped about its plans, noting that it will continue to focus on employment and inflation rates and gauge whether those continue to see improvements.
USA government bond markets are rapidly pricing in higher odds of, not only a December rate hike, but also a faster pace of rate hikes in 2016.
The New Zealand dollar rebounded from its selloff at the start of the day when the US Federal Reserve signalled it may raise interest rates in December, as traders assessed the scope for the local Reserve Bank to cut its benchmark rate this year.
In the statement the committee said “economic activity has been expanding at a moderate pace”.
USA crude was down 0.5 percent at US$45.82 a barrel, but was up almost 3 percent for the week and 1.6 for the month, while Brent slipped about 0.4 percent to US$48.63, up 1.3 percent for the week and 0.5 percent for October.
A 4.1 per cent gain in Apple’s shares to $119.27 also helped to support indices a day after stronger-than-expected results.
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Investors will now be closely monitoring United States data, including gross domestic product due later in the session, to gauge the strength of the economy and how it could affect the Fed’s monetary policy. US crude slipped 40 cents to $45.54 in electronic trading on the New York Mercantile Exchange.
