- Federal Reserve keeps interest rates on hold
- Rates held at 0.25% to 0.5%
- Fed statement shows little has changed but December commitment underpinned
- Janet Yellen press conference currently underway
The US Federal Reserve has kept rates on hold. Photo: iStock
By John J Hardy
Overall assessment is that there is very little change to the statement and economic forecasts, but a fairly strong commitment to a December rate hike in the dot plot. Note the three dissenters.
It's a real mixed bag, but the market is taking it as somewhat dovish on the longer-term Federal Reserve policy forecasts and perhaps this was the one chance for the Fed to show its teeth in the face of financial stability and political risks and once again failed to do so. It will be interesting to see if Janet Yellen's press conference shows the same lack of conviction as previous appearances.
Adjustment to statement:
Description of the economy: almost nonexistent changes
Description of inflation: no notable change
Policy guidance: hike case cited as having strengthened
Dissenters: three dissenters, who wanted to hike - this is perhaps hawkish but not a major Surprise - all from regional Fed presidents, none on the board dissenting
Graphic: comparison of July and September statements
Growth forecasts - 0.1% downgrade for 2016
Inflation forecasts - 0.1% downgrade of headline for 2016, no changes for core CPI or longer term projections.
Unemployment rate: 0.1% upgrade for 2016
Dot plot: looks like a strong commitment to a December rate hike as most show a forecast of 0.50-0.75% for the policy rate at the end of this year. As well, there was a downgrade of the longer-term policy projection to 2.75-3.00% from more like 3-3.25% at the June meeting which is not a big surprise after discussion of a lower neutral policy rate recently.
Also, please see additional comments and thoughts from further perusal of the statement, accompanying materials, and the Yellen presser as comments at the bottom of this post.
-- Edited by Martin O'Rourke