Mixed reactions as Fed holds rates level

Federal Reserve chief explained that the federal funds rate will stay unchanged considering the weak global economy and low inflation [Xinhua]

US stocks registered mixed reactions to the Federal Reserve’s decision Thursday to leave interest rates unchanged.

The Dow Jones Industrial Average closed down 0.39 per cent following Federal Reserve chief Janet Yellen’s statement that interest rates would not rise partially due to the fact that “the outlook abroad appears to have become less certain”.

While the SP 500 also closed down 0.29 Thursday, the Nasdaq just barely inched up 0.10 per cent.

Most market analysts had anticipated that the Fed would end months of often nervous anticipation and announce a rate hike. The interest rate remains at 0 to 0.25 per cent.

“The committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its two per cent objective over the medium term,” the Fed’s Open Market Committee (FOMC) said in a statement released following their two-day meeting.

The FOMC also said it feared the effects of global volatility on its efforts to prevent inflation rates from falling.

“Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term,” their statement added.

The FOMC said that its decision Thursday is designed “to support continued progress toward maximum employment and price stability”.

Markets will now be looking to the Fed to announce a rate hike in October.

But if previous FOMC statements are anything to go by – coupled with the fears that China may not meet its seven per cent GDP growth target for 2015 – a rate hike may not happen until the end of this year, beginning of the next.

The BRICS Post with inputs from Agencies