The US Federal Reserve kept interest rates unchanged on Wednesday and in a direct reference to its next policy meeting put a December rate hike firmly in play.
The US Federal Reserve kept interest rates unchanged on Wednesday and in a direct reference to its next policy meeting put a December rate hike firmly in play.
Investors had expected the Fed to remain pat on rates, but the overt reference to December came as a surprise. The central bank also downplayed recent global financial market turmoil and said that the US labour market was still healing despite a slower pace of job growth.
“In determining whether it will be appropriate to raise the target range at its next meeting, the committee will assess progress — both realised and expected — toward its objectives of maximum employment and 2 per cent inflation,” the Fed said in a statement after its latest two-day policy meeting.
Investors quickly placed bets reflecting a higher chance that the US central bank will raise rates in December, with futures contracts implying a 43 per cent possibility compared to 34 per cent prior to the statement.
“The Fed is seriously considering a December rate hike,” said Harm Bandholz, an economist at UniCredit in New York.
Going into the Fed meeting this week, the market had viewed March as the most likely time for the central bank to begin its rates “liftoff”, but it now sees a greater chance of that happening in late January.
The US dollar rose sharply and yields for US government debt soared in anticipation of higher rates. US stock prices initially fell but regained momentum and closed sharply higher.
