The Fed holds rates steady, for time be­ing

China Daily (USA) - - ACROSS AMERICA -

The Fed­eral Re­serve kept in­ter­est rates un­changed on Wed­nes­day in its last pol­icy de­ci­sion be­fore the US elec­tion, but sig­naled it could hike in De­cem­ber as the econ­omy gath­ers mo­men­tum and in­fla­tion picks up.

The US cen­tral bank said the econ­omy had gained steam and job gains re­mained solid. Pol­i­cy­mak­ers also ex­pressed more op­ti­mism that in­fla­tion was mov­ing to­ward their 2 per­cent tar­get.

“The com­mit­tee judges that the case for an in­crease in the fed­eral funds rate has con­tin­ued to strengthen but de­cided, for the time be­ing, to wait for some fur­ther ev­i­dence of con­tin­ued progress to­ward its ob­jec­tives,” the Fed said in a state­ment fol­low­ing a two-day meet­ing.

That sug­gests the bar is low for a rate in­crease at the Fed’s fi­nal pol­icy meet­ing of the year in mid-De­cem­ber, which has largely been fac­tored in by fi­nan­cial mar­kets.

US stocks ex­tended ear­lier losses and Trea­sury yields fell af­ter the re­lease of the Fed state­ment. The U.S. dol­lar (.DXY) briefly pared losses be­fore fall­ing fur­ther against a bas­ket of cur­ren­cies.

“You are still point­ing to a De­cem­ber hike, they just didn’t pre-com­mit to it,” said John Canally, in­vest­ment strate­gist and econ­o­mist for LPL Fi­nan­cial in Bos­ton.

In the state­ment, the Fed’s in­creas­ing con­fi­dence that prices were mov­ing higher was re­flected in its view that “in­fla­tion has in­creased some­what since ear­lier this year” and the re­moval of its pre­vi­ous ref­er­ence to in­fla­tion re­main­ing low in the near term.

Pol­i­cy­mak­ers have in­creas­ingly con­verged on the like­li­hood of a De­cem­ber hike. In Septem­ber, Fed Chair Janet Yellen said that a move be­fore year’s end was likely as long as US em­ploy­ment and in­fla­tion con­tin­ued to strengthen.

Since then, job gains have con­tin­ued at a solid rate and in­fla­tion has ticked higher, putting both close to the Fed’s long-run tar­gets. The econ­omy also has gained mo­men­tum, grow­ing at a 2.9 per­cent an­nual pace in the third quar­ter af­ter a fairly slug­gish first half.

You are still point­ing to a De­cem­ber hike, they just didn’t pre-com­mit to it.” John Canally, econ­o­mist with LPL Fi­nan­cial

In­vestors had all but dis­counted an in­crease in bor­row­ing costs this week ahead of the Nov. 8 US elec­tion.

Polls show­ing Repub­li­can Don­ald Trump gain­ing ground on Demo­cratic ri­val Hil­lary Clin­ton in the race for the White House sparked a slide on global eq­ui­ties mar­kets, with the bench­mark S&P 500 in­dex headed for its sev­enth straight day of de­clines.

The Fed has held its tar­get rate for overnight lend­ing be­tween banks in a range of 0.25 per­cent to 0.50 per­cent since last De­cem­ber, when it raised bor­row­ing costs for the first time in nearly a decade.

Kansas City Fed Pres­i­dent Es­ther Ge­orge and Cleve­land Fed Pres­i­dent Loretta Mester dis­sented in Wed­nes­day’s de­ci­sion.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.