Putting behind the surprise sharp downturn in job creation in May that had raised worries about the economy, the Federal Open Market Committee, which sets the monetary policy, said employment and economic growth had grown moderately since their mid-June meeting.
The Fed has upgraded its assessment of the economy at other meetings this year – for instance, saying in April that “labor market conditions have improved further” – only to backtrack when faced with global financial-market turmoil and surprisingly weak data at home.
Bethune said he still thought the Fed would wait until December before raising rates but that a September move was possible if hiring remains strong and the global economy and markets remain stable. Park Jong-hong, Arirang News. Originally, the Fed was expected to raise rates four times this year.
Esther George, who leads the Kansas City Federal Reserve Bank, was the only FOMC member to vote to raise rates, as she has done on several occasions in the past. Near-term risks to the economic outlook have diminished.
The US rate hike is back on the agenda of the Fed Reserve. “Household spending has been growing strongly but business fixed investment has been soft”. Market indicators of inflation, such as the spread between the short-term and long-term securities, have remained low compared to the levels which the Fed was expecting.
Gains on shorter maturities were limited as policy makers said that “near-term risks to the economic outlook have diminished“. However, the tone of the policy statement which accompanied the announcement was generally adjudged to be relatively hawkish – a factor which is likely to help the US Dollar (currency: USD) moving forward.
Stock averages posted a modest increase Wednesday after the statement was issued at 2 p.m. Eastern time, before drifting lower later in the afternoon.
When Britain did vote to leave the union and markets sank, some economists even suggested that the Fed’s next move might be to cut, rather than raise, rates. Attention will now be in the second quarter US gross domestic product estimate expected on Friday, which could show improvements from the previous quarter.
Inflation continues to run below the Fed’s 2 percent target, a major concern for Fed officials.
It expressed increased confidence in the labour market following a strong jobs report in June.
“As expected… there are no hints, nods or winks regarding the timing of the next rate hike”, said Ward McCarthy, chief financial economist at Jeffries & Co.
Treasuries have rallied in 2016 as the Fed held off on raising rates after liftoff from near zero in December, while central banks in Japan and Europe maintained unprecedented stimulus.