Since raising its key rate from a record low in December, the Fed has held off on raising rates again.
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Stephen Guilfoyle, managing director at Deep Value, told Xinhua Wednesday that he expected more volatility in financial markets worldwide after the Fed statement.
USA stock indices notched modest gains on Wednesday after the Federal Reserve policy makers kept key interest rates unchanged and scaled down its forecast for the number of rate increases to two in 2016 from an earlier projection of four.
For markets, “as much as I’d like to say monetary policy is no longer in the driver’s seat, it seems like it still is”, said Jeff Moser, portfolio manager at the Wells Fargo Large Cap Core Fund, ahead of the announcement. A recent Wall Street Journal survey found economists expect just two increases this year.
The Federal Open Market Committee, the central bank’s policy-setting panel, said it “currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labour market indicators will continue to strengthen”.
“Global economic and financial developments continue to pose risks”, the FOMC statement said. The majority of policymakers now said they expected it would be appropriate to raise rates by about a half a percentage point by the end of this year.
It noted that “inflation picked up in recent months” but remained below the Fed’s 2 percent target. The Dow Jones industrial average was up 74.23 points at 17,325.76, while the broader S&P 500 composite index advanced 11.29 points to 2,027.22 and the Nasdaq composite gained 35.30 points to 4,763.97.
The Fed’s job is to promote full employment and stable prices.
Georgette Boele, an ABN Amro Group NV strategist and third-most accurate precious-metals forecaster tracked by Bloomberg in the fourth quarter, said gold is more likely to reach her year-end estimate of $1,300 after the Fed’s statement.
Overnight, the Powershares DB US Dollar Bullish Fund (UUP) fell 1.1%, the iShares MSCI Emerging Markets ETF (EEM) jumped 2%, the iShares MSCI Malaysia ETF (EWM) rose 1.6%, the iShares MSCI South Korea Capped ETF (EWY) gained 2.1%, the iShares MSCI India ETF (INDA) was up 2.1%.
The Fed’s committee, led by Chair Janet Yellen, had estimated in December that the economy would grow 2.4% this year and it would raise rates four times. The Fed raised the short-term rate it controls in December from nearly zero for the first time in almost a decade. It was the very last question, and it asked if negative interest rates were something the Fed may consider if conditions warrant. The dollar decreased to 0.9873 Swiss francs from 0.9880 Swiss francs, and it inched up to 1.3362 Canadian dollars from 1.3270 Canadian dollars.
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MSCI’s broadest index of Asia-Pacific shares outside Japan climbed 0.9 per cent and Australian stocks added 0.8 per cent.
