For the year, the benchmark S&P 500 is up more than 6 percent.
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Fed policymakers also forecast that inflation will almost reach its 2 percent target next year and remain 2 percent in 2018 and 2019. “This, in spite of the fact that it hasn’t hit its current inflation target, doesn’t seem likely to and hasn’t announced anything that might help it get there or beyond any time soon”.
The Fed aims for 2 percent inflation as a buffer against deflation, a harmful decline in prices and wages. With Fed hike in December still in doubt, the carry trade flows will continue to prop up the high yielders and Aussie looks to hold ground above the.7500 level for the time being.
The Fed’s new interest rate projection for 2017 left rates centred at 1.125 per cent, down from 1.625 per cent in June.
With the high likelihood of only a very gradual increase in rates, long-term CDs and CD ladders still make sense.
For the first time in almost two years and for the first time since Yellen became Fed chair in February 2015, there were three dissents to the Fed’s statement.
Still Ms. Yellen sounded like a reluctant bull and it was her tone of indecision more than anything else that prompted the market to run stops against the greenback this morning as Fed funds futures still only give a 50/50 chance of rate hike in December. Indonesia’s central bank is forecast to lower interest rates today, and some economists see scope for a cut in Norway as well.
Federal Reserve chair Janet Yellen at a post-meeting press conference acknowledged the stronger case for a rate rise but noted that it was reasonable to wait to see more progress towards its objectives. So why is the Fed waiting? The three officials are all presidents of regional Fed banks – Esther George of Kansas City, Loretta Mester of Cleveland and Eric Rosengren of Boston. Whilst the committee decided against raising rates, it has not given up aspirations of implementing a rate rise at least once in 2016. “We had previously thought it was going to be an aggressive Fed rate hiking cycle and it’s clearly not going to be that”.
The Fed has blown hot and cold on the prospects of a second rate move this year after being stung by rocky financial market movements after its December increase. On Wednesday, the dot plot could be revised further to a forecast of just one rate hike during 2016, if, as expected, the Fed doesn’t act this week. That speculation was primarily based on two board members remarking that perhaps now is the time to raise rates again.
Still, analysts hope to glean additional insights into Yellen’s thinking regarding the economy’s sluggish growth and last month’s downshift in hiring.
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Wall Street piled on gains in the final hour on relief that the Federal Reserve had opted to take pause on interest rates for another month. Gains are led by energy and information technology. Implicit in Mr. Trump’s comments is the suggestion that by boosting Mr. Obama, the Fed is providing an assist to Democratic presidential nominee Hillary Clinton, who benefits if voters view his economic record positively.
