US Fed retains interest rate, but not for long

US Fed retains interest rate, but not for long”

"We don't sense a significant loss of confidence from the FOMC that inflation will return to target over time", he said, referring to the Federal Open Market Committee, the Fed's policy panel. Whereas it previously said inflation on a 12-month basis was running "somewhat below" the 2 percent target, the committee now says headline and core inflation is running "below" 2 percent.

While the statement did seemingly set the Fed up to begin paring its balance sheet as soon as its next meeting in September, the lack of surprise allowed the market to revert to the trend of dollar weakness seen before the statement's release.

"Investors have gradually priced in the whole event and considering that the Fed sees the near-term risk of the economy is neutral, I don't think the market will expect a third rate hike in the foreseeable future or at least in this quarter", said Mark To, head of research at Hong Kong's Wing Fung Financial Group.

Most analysts expect the Fed to pause its rate hikes at least until December, with futures markets now pricing in a roughly 50% probability of a year-end rate increase.

South Korea's Kospi was up 0.6 percent and Australia's ASX 200 gained 0.2 percent.

Unemployment has moved steadily downward since the start of 2017 to a very low 4.4 per cent, but wage gains have remained sluggish and price pressures have actually retreated in the first half of the year, leaving economists dumbfounded. It lost 0.9 percent to 0.9587 francs per dollar.

Fed watchers say the central bank could announce its new plan at its next meeting in September.

The Fed's balance sheet has soared five-fold - to $4.5 trillion - since the summer of 2008, just before the financial crisis erupted.

Markets are expecting United States economic growth to show a significant rise to 2.6 per cent in the second quarter compared to 1.4 per cent in the first quarter, fuelled by solid hiring and an uptick in consumer spending. The Washington-based lending institution also lowered its 2018 outlook for US growth to 2.1% from 2.5%.

Ford shares fell 2.5% in morning trading, after the USA carmaker reported almost flat revenues for the quarter and warned investors that key markets, including North America and Europe, would be less profitable this year than last.

European markets were higher today, with the Spanish Ibex Index rising 0.35 percent, STOXX Europe 600 Index climbing 0.51 percent and German DAX 30 index gaining 0.31 percent. The vote was unanimous among the Fed's Board of Governors and will keep the rate between 1 and 1.25 percent.

"Fed officials are broadening out their reasoning for tighter monetary policy", said James Knightley, analyst at ING Bank, in a note to clients.

Like this