Federal Reserve Holds Interest Rates

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All day long financial news sites have been littered with headlines speculating about whether or not the U.S. Federal Reserve would at last raise interest rates this month as has long been anticipated. If not speculating about whether or not, they speculated all day about what if. Between that and the reports on last night’s Republican debate, its been a fun day reading the news.

Well, the Fed, in its infinite wisdom, has chosen not to raise interest rates, kicking the can further down the road. The press release following the monthly meeting said, in part:

“To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate. In determining how long to maintain this target range, the Committee will assess progress–both realized and expected–toward its objectives of maximum employment and 2 percent inflation.”

The Fed made its announcement at 2:00 p.m. EDT as planned. The Dow plunged nearly 100 points before an almost immediate rebound to 16,795.74 at quarter after the hour.

The S&P Index simultaneously dropped by 10 points before rebounding to 2,003.79. Likewise, the NASDAQ chart followed pattern, dropping from 4,906 to 4,886, before reestablishing itself at 4,920, 40 minutes after the announcement.

Volatility was the word of the day in other world markets as trading hours came and went whilst waiting for the Fed’s news that was not published until 7:00 p.m. UTC. The FTSE closed the day down 0.7% at 6,189.99. The SSE Composite in China closed down 2.1% at 3,086, continuing its decline from 5,063 that began three months ago on 15 June 2015. Since then SSE has declined by 40%.

Although losers outnumbered gainers on the LSE, the numbers were close with 628 losers versus 567 gainers. Both were heavily outweighed by 858 stocks that remained unchanged. We will have to wait until Friday’s trading to see what impact of significance, if any, the Fed’s announcement has on the UK market.

Although the New York exchanges have not yet closed as of this writing, gainers outnumbered loses by a ratio of four to one, 2,177 to 589.

At 1,275 to 589, NASDAQ gainers also won out over losers, more than two to one. The Toronto Exchange produce similar results with 559 gainers versus 328 losers.

The Fed seemed to indicate that it now no longer sees a raise in interest rates coming in the near future as it seems to be taking a much broader view of the global economy relative to that of the U.S.

“When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”

So, once again, we begin a new cycle of waiting for the next month’s announcement, worrying and speculating more as that day approaches.

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