Fed Keeps Rate Rise Firmly In The Locker

The Federal Reserve sees risks to the outlook for US economic activity as it decides not to raise borrowing costs again.

The US Federal Reserve has confirmed there will be no rate rise this month, as it monitors a series of economic concerns.

The policy statement from the rate-setting committee said that while the US economy was still expanding modestly, it was concerned at weaker recent jobs data and global pressures.

It stopped short of repeating its warning of the previous month about the prospect of a sharper-than-expected economic slowdown in china.

The decision was announced following a two-day meeting between policymakers – split on the case for a rise in the target rate for overnight lending between banks.

The rate has been steady at 0% to 0.25% since 2008 when the effects of the financial crisis took its toll on the US economy.

While Fed chair Janet Yellen and others have previously stated expectations that rates will rise this year, three members of the Federal Open Market Committee (FOMC) have spoken publicly of their fears that it is too early.

Only one FOMC member voted for a rate rise during October’s meeting.

In its statement, the Fed said that rates would only start to rise when it is “reasonably confident” that inflation will move back towards its 2% target.

It is currently being held down by weaker oil prices but those effects will soon start to ease out of the calculations.

Today’s decision gives the Fed time to monitor the recovery in jobs and wages – and global developments – ahead of the FOMC’s next scheduled meeting in December.

The data will include Thursday’s third-quarter GDP estimate as well as employment reports for October and November.

It will also get a chance to see how monetary policy easing in the eurozone, Japan and China plays out in financial markets – a scenario that has propped up the value of the dollar.

The strong dollar has been blamed for falling profitability among multi-nationals and manufacturers.

The greenback rose 3% last week when the European Central Bank hinted at more bond-buying stimulus ahead.

It gained 1% against the euro when the Fed’s policy statement was revealed.

US stock markets came off the boil, with the S&P 500 losing about half its gains but remained positive.

Paul Schatz, president and chief investment officer at Heritage Capital, told Reuters: “The statement is as expected.

“We knew they weren’t raising but they had to move away from (the) dovish statement that focused on China and Asia last time and grease the skids for a December increase.”







Source: SKY NEWS

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