The Federal Reserve has left short-term interest rates unchanged and the markets have responded positively.
The Federal Reserve has left short-term interest rates unchanged.
During the press conference after this week’s meeting, Chair Janet Yellen emphasized that “The economy has a little more room to run than previously thought.” and cited the rising number of jobs, household spending and economic growth as indicators that there is no need to change the rate target at this time.
Now, the US Central Bank is looking for the funds rate to rise to 1.1 percent in 2017, as opposed to the 1.6 percent estimate in June.
Seven out of ten members of the committee voted to keep the rates unchanged. When asked about the dissents on the decision, Yellen said, “We do have some accomodation that if we move along the current path, it’s something we will need to remove over time. There is general agreement among participants on that, but the precise timing of what is the right timing for removing that accommodation is something on which we had active discussions and there are a range of opinions. The dissents represent a judgment on the part of some of my colleagues that it’s important to begin that process now.”
The markets reacted positively to the Fed holding interest rates steady, just like the last Fed meeting in June. As of market close on Wednesday, the Nasdaq hit a record high, adding 53.83 points to 5,295.18; the Dow Jones Industrial Average added 163.74 points to 18,293.70.; and the S&P 500 advanced 23.36 points at 2,163.12.
The S&P/TSX composite index also inched upwards–188.84 points at 14,710.82, comprised of large gains in the resource sector which includes gold, metals and energy. The materials group–precious and base metals miners and fertilizer companies–jumped 4.6 percent.
Spot prices also rallied after the Fed’s decision: gold trended upwards to a two-week high of $1,337.50 an ounce and silver at $19.90.
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