Rodney Ramcharan, director of research at the USC Lusk Center for Real Estate, tells CPE that the Federal Reserve is likely setting the stage for a rate hike by the end of the year.
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A more common measure of inflation, core CPI, has exceeded that target, however, coming in at 2.2% year-over-year in August.
The Reserve Bank of New Zealand kept its official cash rate unchanged at 2% on Thursday, but left the door open for further easing in the future, citing a relatively stronger kiwi dollar and inflation hovering below the central bank’s target.
It may have been hard for the Fed to bite the bullet and raise rates given the highly charged upcoming presidential election. Some expected that a rate hike would be announced this month, but today’s meeting confirms that the reserve bank is likely to wait until December to officially change pace.
“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.
“If we had not received these mixed messages, I don’t think anybody would have been surprised”, said Sam Stovall, U.S. equity strategist for S&P Capital IQ. The Standard & Poor’s 500 index rose 11 points, or 0.5 percent, to 2,174 and the Nasdaq composite rose 34 points, or 0.7 percent, to 5,329. It was the first time it has used that wording since last December, when it last raised rates.
And while none – except for Singapore – run monetary policies that actually target exchange rates, low interest rates do help them keep their currencies competitive.
The Fed also trimmed its median rate hike guidance for this year, from two increases to just one. Yellen even said the case for a rate increase has “strengthened”.
US benchmark crude rose 98 cents to close at $46.32 a barrel, while Brent crude, used to price worldwide oils, gained 82 cents to close at $47.65 a barrel.
The newly created real estate component of the S&P 500 climbed 1.9 percent, far more than any other sector.
United States crude (WTI) futures advanced 0.9 per cent to $45.75 after soaring 2.9 per cent on Wednesday. The Fed’s preferred measure of inflation, core PCE, has remained at 1.6% year-over-year since March; a preliminary estimate for July is the most recent data available.
While backing away from Negative Interest Rate Policy (NIRP), the Bank of Japan promised to cap 10-year Japanese Government Bond (JGB) yields at zero percent unless and until inflation hits their 2 percent target, something that hasn’t really happened in nearly three decades. Since they weren’t, the dollar fell to 100.44 yen from 101.84 yen. The euro rose to $1.1231 from $1.1190.
EDF inched 0.4 percent higher, underperforming the market after the French nuclear power utility said it was cutting its 2016 earnings expectations due to lower output.
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Its “comprehensive assessment” indicated that the bank’s policy moves had largely been successful, although it acknowledged the side effects of low yields and negative interest rates.
