It came as no surprise that the Federal Reserve maintained the federal funds rate after its September meeting. After months of speculations, the U.S. central bank lauded the improvement in the economy in general; however, the chance of a rate hike was still out of its table.
Confidence In Economic Growth
Fed Chairwoman Janet Yellen explained in her speech that most of the participants agreed to the assessment that the economy was making progress and the unemployment rate was close to sustainability in the long term. Yellen also added that the committee was considering what seemed to be “normal” in the economy and in the global economy before revising the rate path.
As written in the released report by the FOMC, “The Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. 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.”
In terms of inflation, Yellen said that in their point of view they were undershooting the inflation goal and wanted to make sure they stay on the course that may raise it to 2 percent. In line with this, the Committee will take into consideration a wide range of information, including measures of labor-market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
At the conclusion of its meeting, the FOMC indicated that the federal funds rate will depend on the economic outlook. Apparently, the strong labor market at the start of the third phase of the year and the modest growth of the economic activity were not enough for the central bank to push the rate hike. One of the major concerns here was the declining business fixed investment, although the household spending seemed strong in the past few weeks.
Market Impact
The U.S. currency dropped against its major rivals as the Fed left its rates unchanged. During the morning session, the euro, the pound and the Aussie gained 0.38 percent, 0.27 percent and 0.45 percent respectively. The yen advanced by 0.17 percent, while the Canadian dollar lost 0.48 percent.
Meanwhile, the yellow metal was also in winning territory as it traded 1.337.35 per troy ounce, adding 0.45 percent. Silver was up by 0.25 percent to 19.818 while copper gained 1.02 percent to 2.177. After days of trading with a red candle, oil prices found a breather after the outcome of the Fed meeting. Brent oil traded at $47.10, up by 0.62 percent and the crude oil went up 0.77 percent to 45.69 per barrel.
Most of the stocks rose at the close of the morning session, headed by the shares in Asia. Chinas’s CSI 300 and the Shanghai Composite gained 0.9 percent and 0.7 percent respectively. Nikkei 225 moved up 1.91 percent, and the Hong Kong Hang Seng climbed 0.4 percent. S&P 500 futures eased 0.03 percent, but DAX was up 0.90 percent. The U.S. Dollar Index skid to 95.18, losing 0.29 percent.
Elsewhere, Fed Chairwoman Yellen denied the rumors that the central bank was helping President Obama after leaving the interest rate unchanged. Prior to the meeting, some market experts concluded that the bank does not want to make necessary adjustments before the presidential election this November. The chairwoman immediately dismissed the previous claims of presidential aspirant Donald Trump that the political pressure played a vital role in the monetary policy decision of the bank. With conviction, Yellen said “We do not discuss politics at our meetings, and we do not take politics into account in our decisions.”