As expected the US Federal Reserve sat on its hands at its two day meeting which ended early Thursday, Sydney time with the next rate rise now expected at its December meeting.
Its key rate was left at 1% to 1.25% by the Fed’s key policy body, the Open Markets Committee.
The next big test comes Friday night with the release of the October jobs report which is expected to see around 300,000 jobs created (many will be jobs restored after the loss of 33,000 jobs in September because of the various hurricanes).
Wages are forecast to rise by 2.7% in the year to October, down from 2.9% in the year to September – any increase in this measure will confirm a rate rise in December.
Wall Street ignored the decision with the Dow and S&P 500 at or around record levels – only the Nasdaq was a touch easier.
The Aussie dollar was around 76.70 US cents. Gold rose, but oil was down a touch.
Chair Janet Yellen will spend what could be her final months in the job balancing evidence of a resilient economy against continuing weak inflation.
President Donald Trump is expected to announce his nominee for Fed chair tonight Sydney time – hours after the Bank of England is expected to lift UK interest rates for the first time since 2003.
While the Fed continued to signal that “gradual” rate rises lie ahead in its post meeting statement, there were no hints as to the timing.
The statement however acknowledged that while petrol prices had risen in the wake of the recent hurricanes (especially Harvey) “inflation for items other than food and energy remained soft.”
Core inflation, which strips out volatile food and energy prices, fell from 1.4% in July to 1.3% in September, and remains well below the Fed’s 2% target and has done so for five and a half years.
The statement repeated earlier optimism that inflation is likely to stabilize at the 2% target over the medium term, as the Fed has been saying for years.
There were no dissents at the meeting.
The statement also noted that the labour market had continued to improve and “economic activity has been rising at a solid rate despite hurricane-related disruptions.”
In the statement after the previous meeting economic activity was described as “moderate”. Now it is solid and analysts say that change alone confirms there will be a rate rise next month, despite the soft” inflation.
