Fed expected to keep rates unchanged, may signal year-end hike

New comment
 
Comments that do not relate to the "Fed expected to keep rates unchanged, may signal year-end hike", have been moved into this topic.
 
The U.S. Federal Reserve is expected to keep interest rates unchanged on Wednesday amid tepid inflation and recent weak economic data, but could signal an increased likelihood of a hike by the end of the year.

The U.S. central bank raised its benchmark overnight interest rate to a range of 0.25 percent to 0.50 percent in December, the first hike in nearly a decade, but has held rates steady this year.

Economists polled by Reuters see a slim chance of a rate increase at the conclusion of the Fed's two-day policy meeting on Wednesday, with the majority expecting one at the meeting in December.

"The last thing the Fed wants is to disrupt financial markets with a big surprise," said Torsten Slok, chief international economist at Deutsche Bank (DE:DBKGn).

The Bank of Japan on Wednesday added a long-term interest rate target to its massive asset-buying program in an overhaul of its policy framework aimed at accelerating achievement of its 2 percent inflation target.

The BOJ said it would continue to buy long-term government bonds, but abandoned its base money target and instead set a "yield curve control" under which it will buy long-term government bonds to keep 10-year bond yields at current levels around zero percent.

The Fed's rate-setting committee will release its policy statement at 2 p.m. EDT (1800 GMT). Fed Chair Janet Yellen is scheduled to hold her quarterly press conference half an hour later.

The 17 Fed policymakers will have to balance a strong labor market, marked by an unemployment rate of 4.9 percent and job gains that are outpacing population growth, with inflation that is still well below the central bank's 2 percent target and weak August readings for manufacturing and service industry activity.

read more

New comment