Prices for fed funds futures contracts suggested investors continued to see just better-than-even odds of a hike at the December policy meeting, and nearly no chance of an increase in November.
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The Fed said in a statement Wednesday that the USA job market has continued to strengthen and economic activity has picked up.
“The economy has a bit more running room than might have been previously thought”, Yellen said.
“I can say emphatically that partisan politics plays no role in our decisions about the appropriate stance of monetary policy”, Yellen said.
However, there wasn’t unanimous agreement over the Federal Reserve’s decision.
“We do not discuss politics at our meetings and we do not take politics into account in our decisions”. Donald Trump accused the Janet Yellen of keeping interest rates low due to White House pressure.
“We judged that the case for an increase had strengthened but decided for the time being to wait for continued progress toward our objectives, ” Chairwoman Janet Yellen said.
“We’re generally pleased with how the USA economy is doing”, she said, although the Fed did cut its forecast for growth this year from 2% to 1.8%. Wednesday, though, two more board members joined George in the minority – Loretta J. Mester and Eric Rosengren, Federal Reserve Bank presidents in Cleveland and Boston, respectively.
Fed officials also marked down their estimate of the long-run level of short-term rates to 2.875 percent from 3 percent in June. The outlook for the end of 2018 also fell by a half-point, from 2.4 per cent to 1.9 per cent.
Some economists had pointed to the minutes of the Fed’s July meeting and comments from officials since then to suggest that the central bank’s “hawks” – those who think it should be acting faster to raise rates – are gathering adherents from the dove camp. All of these market reactions indicate somewhat of a more dovish interpretation of Wednesday’s events. The committee does have a meeting in November just before the presidential election, but a rate hike seems highly unlikely because it might be seen as affecting the vote.
“That really stands out that they’ve become significantly more dovish in their projection materials, but clearly trying to signal to the market that December is very much live”, David Keeble, New York-based head of fixed-income strategy at Credit Agricole, told Bloomberg.
The Australian dollar has climbed to a two-week high against the green back, as the US dollar weakened on the US Fed’s decision.
The Fed said US economic activity had picked up and job gains were “solid” in recent months.
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This was partly reflected by declines in energy prices and in prices of non-energy imports, it mentioned.
