Rate rise looms – in the US. The US Federal Reserve sat on interest rates overnight Wednesday, pushing the next rate rise from the central bank out to the September 25 and 26 meeting.
The Fed left the target range for the federal funds rate unchanged at 1.75% to 2%, as widely expected.
The news left markets mostly unmoved – Wall Street was mixed with losses on the Dow and S&P 500, while Nasdaq was up off the back of the solid report from Apple the day before.
Yields on US treasuries rose ahead of the Fed statement – the 10 year bond saw its yield back over 3% for the first time months. It hit a high of 3.014% before retracing to trade around 2.995%. Gold and oil were easier.
In its post-meeting statement the Fed described US activity growth as coming in at a “strong rate” and judged that household spending and investment had “grown strongly”.
“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly,” the Fed said in a unanimous statement following the conclusion of its latest two-day meeting.
The July jobs report is out Friday night, our time will give us another look at the strength of the labour market..
“On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 per cent,” it said.
The Fed’s statement made no mention of the administration’s protectionist trade policies and maintained that the risks to the outlook were “roughly balanced.”
The European Central Bank meets tonight – it is already looking to end its quantitative easing program at the end of the year (but watch the slowing eurozone economy – it could force a change of heart).
The Bank of England is mulling another rate increase which could come at the latest meeting tonight, but UK economists wonder if it will seeing there are growing signs the economy is sliding ahead of the brexit next March.
The Bank of Japan stood as the exception earlier this week, pledging to maintain extremely low rates, although it introduced extra flexibility into its stimulus buying.
