Finance

US Federal Reserve holds interest rates steady

US Federal Reserve holds interest rates steady

Unigestion investment manager Olivier Marciot, approved of the clarity in the Fed's meeting minutes: "As expected, the Fed left rates unchanged tonight but finally provided clearer details on how it will start unwinding its big balance sheet".

The rand weakened to a five-week low against the dollar on Tuesday before the central bank's interest rate decision this week and the U.S. Federal Reserve's policy meeting.

Asian stocks are trading mixed and US Treasury yields spiked while oil prices hovered near four-month highs ahead of Friday's meeting between OPEC and non-OPEC producers.

Although recent hurricanes are expected to give a shock to the US economy, the Fed continues to expect that the economy would expand at a moderate pace in the future.

Apart from currency moves, yields on short-term and longer-term U.S. Treasuries also rose Wednesday following the Fed's statement. The monthly job gains remained at a robust pace of 156,000 in August, above the pace of 100,000 to 120,000 that would be consistent with a stable unemployment rate.

"It's just a restless market before the Fed", said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington.

Costly UN not delivering good enough, says Trump
The US president kicked off a week of meetings and speeches with foreign leaders in New York City. Security Council has basically exhausted its diplomatic options for dealing with North Korea.

Despite not raising rates, the Fed indicated that if persistently low inflation rebounds, it may hike rates one more time this year and three times in 2018. But they still are forecasting another increase of 0.25 of a percentage point by the end of the year - a signal they think the economy is still on solid ground. While this has not triggered an upward movement in interest rates yet, one could easily imagine a bit of a spike if inflation suddenly picks up or the economy accelerates from the 2.0 percent growth trend it has settled into during the recovery.

The Australian dollar climbed to $0.8012 from $0.7952.

Yellen expected that the low inflation is due to transitory factors that are likely to disappear over the course of the coming year.

Fed policymakers actually revised up their forecast for economic growth this year to 2.4 percent from a 2.2 percent projection in June.

Interest rate futures traders are now pricing in a 72-percent chance of a December rate hike, up from roughly 60 percent before the statement, according to the CME Group 's FedWatch Tool. This contradicted evidence that wage growth was not keeping with inflation and creating problems for consumers, which raises some interesting questions as to what is really happening in the United Kingdom economy right now.

Gold "bulls are likely to be stressed as the market adjusts to incorporate Fed rate increases", commented Rob Haworth of US Bancorp Wealth Management.


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