A weaker dollar in the wake of the Fed’s interest rate announcement drove sterling higher by 0.4% to 1.309 against the greenback.
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Federal Reserve Board Chair Janet Yellen listens to a reporter’s question during a news conference on Federal Reserve’s monetary policy, Wednesday, Sept. 21, 2016, in Washington.
“This seems to have been one of the most divisive [Fed] meetings in recent memory”, says Paul Ashworth, chief USA economist at Capital Economics, a research firm.
United Kingdom markets were also buoyed by the latest CBI Industrial Trends Survey, which showed manufacturing output holding firm in the three months to September.
The U.S. central bank has come under a lot of criticism lately by Wall Street for the fact that many of its officials give speeches that send wildly conflicting messages.
For Canada, which relies on the USA for the bulk of its trade activity, the OECD expects GDP of 1.2 per cent in 2016 – down from 1.7 per cent in the agency’s June outlook.
The market was incorrectly opened at 11:10am for securities in the N – R range, during which time a number of trades were made, however this group was then put back in to trading halt, with all trades made during the incorrect opening cancelled, and the new open delayed until 1:20pm.
Trump’s sometimes unorthodox comments on USA fiscal and monetary policy, including accusing Yellen of being a tool of President Barack Obama, could inject nervousness in financial markets, as did Britain’s June vote to pull out of the European Union. The Fed last raised rates in December, which was the first time rates had gone up in almost a decade, following the 2008 financial crisis and recession. But it noted that business investment remains soft and inflation too low and that it wants to see further improvement in the job market before raising rates again, after the years-long cycle of low rates aimed at reviving the economy following the 2007-2008 financial crisis.
But if Fed leaders can’t get all voting members of the FOMC to back them, they can still preserve market confidence if they enjoy the support of all members of the board.
The report said existing home sales slid 0.9 percent to an annual rate of 5.33 million in August after tumbling by 3.4 percent to a downwardly revised 5.38 million in July.
“The FOMC is not a body that suffers from group think”, she said.
But there’s a bigger reason for the rally: The Fed has notably scaled down expectations for a future rate hike.
“The economy has a little more room to run than previously thought”, Yellen said.
Goldman Sachs said its United States economics team assigns a cumulative 65% probability to a rate hike by the 14 December FOMC meeting, which is roughly the same as implied by fed fund futures. “The forecasts and the statement suggest a rate hike is increasingly likely in December”, she said.
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Instead, most central bank observers anticipate that if the Fed acts, it will be in its final meeting of the year, in December.
