Fed announces rate hike decision

Marco Green
November 9, 2018

The Federal Reserve said Thursday it is leaving short-term interest rates unchanged.

"There was nothing in the policy statement to suggest that officials are wavering from their plans to hike interest rates again in December", said Michael Pearce, senior economist for Capital Economics.

Mr McMillian also acknowledged policymakers noted "business investment has moderated", which may be a drag on future growth.

"In view of realized and expected labor market conditions and inflation, the Committee chose to maintain the target range for the federal funds rate at 2 to 2 ¼ percent", the FOMC said in a statement.

The FOMC raised rates a quarter-point at its September meeting, the third rate hike of 2018.

"We expect the Fed to hike at the meetings in December, March and June, when it would reach the 3%".

"The only surprise here is that they weren't more hawkish", said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in NY. "But apart from that they have not signalled any warning signs at all".

"The Fed has recognized that there is one part of the economy that is slowing a little bit, but it is not deterring them from their "gradual increase" language". The 10-year Treasury note yield, a benchmark for both consumer and business borrowing costs, was 3.23 percent, around the highest since 2011.

Energy stocks were the S&P's biggest drag with a 2.2 per cent drop as U.S. crude oil futures confirmed a bear market, falling more than 20 per cent from their October 3 high as investors focused on swelling global crude supply, which is increasing more quickly than many had expected.

The S&P 500 and Nasdaq closed slightly lower on Thursday after a Federal Reserve statement, and energy stocks were the biggest drag on the S&P as US crude oil prices fell.

The Fed's policy statement did not explicitly take stock of the recent volatility in USA equity markets that led to the selloff in October, or address the possibility of a slowdown in global growth next year.

If Jerome Powell, the Fed's chairman, sounds calm about inflation, the markets will rally.

The Fed's policy decision was unanimous.

Other reports by Click Lancashire

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