As expected, the US central bank’s policy-setting Federal Open Market Committee kept rates on hold following their latest meeting – in a target range of 5.25%-5.5%, a 22-year high. The decision is unanimous 12-0.
The S&P 500 index and Treasuries extended their rally while the dollar slipped after the announcement. Traders also marked down chances of another hike over the coming months.
Officials made minimal changes to the statement. One tweak was to upgrade their description of the pace of economic growth to “strong” from “solid” to reflect better economic data released since their September gathering.
They continue to leave the door open to another hike by repeating prior language on “determining the extent of additional policy firming that may be appropriate”.
They said the economy expanded at “strong pace in third quarter,” compared with prior description of recent “solid pace”; though job gains “have moderated since earlier in the year but remain strong,” after previously saying that hiring had slowed in recent months.
And they flagged that tighter financial and credit conditions” will likely to weigh on economy, after previously mentioning only “tighter credit conditions”; language could be seen as suggesting that the recent jump in long-term Treasury yields reduces the impetus for Fed to raise rates again.
“The extent of these effects remains uncertain,” the Fed said, repeating that it “remains highly attentive to inflation risks.”
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