Growth this year is now expected to be 1.8%, rather than 2% as predicted in June, and the longer-run growth rate was also trimmed to 1.8%. The Nasdaq composite rose 31 points, or 0.6 percent, to 5,272. The figure is 9.1 trillion won lower than the 32.7 trillion won increase experienced a year ago.
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On Wall Street, S&P 500 Index gained 0.65 per cent, led by 1.9-per cent gain for the real estate sector. Futures prices indicate the chance of a rate hike by December climbed to 61 per cent, from 52 per cent a week earlier. It was the first time it has used that wording since late past year, when it last raised rates.
The Fed counts talking to the market – what it calls giving “forward guidance” – as one of its tools, but the story has changed so often that Yellen and her colleagues might do better being less chatty.
One day earlier, the Bank of Japan announced that it left its negative interest rate on certain commercial-bank deposits unchanged and announced to introduce a ten-year interest-rate target. Broader markets all gained about 1 percent. The reintroduction of the balance of risks statement, a sentence the Fed included in almost all of its 2015 press releases, is a step some analysts consider a necessary precursor to a rate increase.
“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives”, the Fed’s policy-making committee said in a statement released after its two-day meeting.
Fed Chair Janet Yellen had said on Wednesday that USA growth was looking stronger and rate increases would be needed to keep the economy from overheating and fuelling high inflation.
The BOJ made an abrupt shift on Wednesday to targeting yields on government bonds to achieve its elusive inflation target after years of massive money printing failed to jolt the economy out of decades-long stagnation.
“On the back of the Fed’s inaction last night, the markets have taken quite some respite from that”, Dafydd Davies, partner at Charles Hanover Investments said, noting mining stocks were pushed “to the forefront of the FTSE 100”.
The Fed will not raise rates at its November meeting, Faucher predicted, because it will want to avoid taking any influence on the presidential election.
Despite the dissent of three more hawkish Federal Open Market Committee members, the consensus around a rate increase before the end of the year appears solid.
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The dollar and the yen fluttered in narrow ranges on Wednesday, penned in by uncertainty about the outcome of Bank of Japan and Federal Reserve policy meetings. Core inflation, which excludes more volatile prices such as energy, is expected to hit 1.7 percent for this year.
