The Federal Reserve is keeping a key interest rate unchanged but sending a strong signal that it will likely boost rates before the end of the year.
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“The Committee made a decision to maintain the target range for the federal funds rate at 1/4 to 1/2 percent”, the bank’s Federal Open Market Committee said in a statement, maintaining the rate it established in December. Fed officials said they expected that economic growth would not exceed 2 percent over the next three years. He believes that the anomalies in the May payrolls number was miscommunicated and suggests the Fed could still have hiked in the summer despite the shock result of the United Kingdom referendum on its European Union membership.
Australian shares rose 0.9 percent, while South Korea’s KOSPI advanced 1 percent.
While Tokyo was on holiday on Thursday, stocks closed up 1.9 percent on Wednesday after the BOJ’s shift to targetting a positive yield curve, a move that was considered bullish for banks, insurers and pension funds.
Winer said he remains concerned how much more stocks can increase in the short-term, with the US presidential election coming and third-quarter company earnings reports around the corner. It also reduced its longer-run rate forecast to 2.9 per cent from 3 per cent.
“It’s hard to get too excited about the dollar when the Fed is lowering its projected path of rate hikes into the future”.
Yellen’s answer at Wednesday’s post-meeting news conference was that there is no inflation threat, so there is no hurry; and she said that if the Fed holds off raising rates maybe even more people will find work.
The core price index for personal consumption expenditure (PCE), the Fed’s preferred indicator for gauging core inflation excluding food and energy, increased 1.6 percent in July from a year ago, still below the central bank’s target of 2 percent.
The US central bank again emphasized that the case for a rate hike has strengthened, although the institution also cut its growth forecast for US economic growth from 2.0 percent (y/y) to 1.8 percent (y/y) in 2016.
In a statement, Steve Hovland, director of research for HomeUnion, said, “As expected, a divided Federal Open Market Committee maintained extremely accommodative monetary policy, citing concerns about low inflation, while monitoring global economic and financial conditions”. The unemployment rate has hovered around 5% for the past year-a level many economists consider to be near full employment.
Gold has rallied 26 percent this year, aided by the low interest-rate environment in the USA and negative rates in Japan and parts of Europe. US benchmark crude was up $1.08 to $46.41 a barrel, while Brent crude, used to price worldwide oils, rose 92 cents to $47.75 a barrel.
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Yellen made clear that weak inflation was still the anchor holding United States monetary policy down, but that the issue was of a different degree to Japan’s.
