US Federal Reserve sits tight on interest rates as markets now wait for possible December hike

29th October 2015


The US Federal Reserve has held off hiking interest rates at its latest meeting.

As widely expected, the Federal Open Market Committee, has kept short-term interest rates at their historic low, pegged between at between 0% and 0.25%, a position they have been at since December 2008.

Echoing September’s meeting, reports show that just one policymaker within the committee, Jeffrey Lacker, voted for a rise this month.

The Fed, which has already indicated that rates could rise within months now has just one more chance, at its December meeting, to tighten monetary policy this year.

In a statement, the FOMC was certainly more bullish and asserted that it continues to see the risks to the outlook for economic activity and the labour market as “nearly balanced” but it is still monitoring global economic and financial developments.

It said: “Inflation is anticipated to remain near its recent low level in the near term but the Committee expects inflation to rise gradually toward 2% over the medium term as the labor market improves further and the transitory effects of declines in energy and import prices dissipate.”

While many economists and commentators believe a rate rise in December is a likely possibility, some feel it may hang on longer before flicking the switch.

For his part, Paul Ashworth chief US economist at Capital Economics feels the Fed is more likely to wait until 2016.

He said: “Our view is still that the November and December employment reports won’t be strong enough to convince a majority of the FOMC members to back a rate hike, but December obviously isn’t out of the question.”

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