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U.S INTEREST RATE POSSIBLE CHANGE MID-YEAR

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FED statement on stock.com

U.S INTEREST RATE POSSIBLE CHANGE MID-YEAR

Jan 29 2015, 10.50am GMT

STOCK.com

After a two day meeting, the Federal Open Market Committee FOMC, released an upbeat report.

Since the last FOMC meeting in December it seems that little has changed in the central bank’s stance on interest rates. The committee resolved in Wednesday’s report that ‘economic activity has been expanding at a solid pace’, citing a low oil price as the catalyst to ‘boosted household purchasing power’ and inflation declining further below the Committee’s longer-run objective.

To support continued progress toward maximum employment and price stability, the Committee reaffirmed its view that the current 0 to 1/4 percent target range for the federal funds rate remains appropriate, but with a proviso that ‘the Committee expects inflation to rise gradually toward 2 percent over the medium term.’

With the horizon fixed on ‘maximum employment and price stability’, the FOMC stated that, ‘Inflation is anticipated to decline further in the near term, but the Committee expects inflation to rise gradually toward 2 percent over the medium term as the labor market improves further and the transitory effects of lower energy prices and other factors dissipate.’ 

The effects of the statement that the FOMC ‘can be patient in beginning to normalize the stance of monetary policy’ had investors initially reacting mildly. It was later that stock markets fell and the USD increased when traders took the statement as a strong possibility of an interest rate increase this year. Oil reacted by losing ground down to nearly 6-year lows of $44.09 with subsequent losses for energy stocks pushing the USA30 [Dow] to end the day down over 1% at 17156.

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