The Fed left interest rates unchanged at an all-time low of 0-0,25%, worried about the risks to the global economy. The US central bank is "monitoring international developments" but has not ruled out an increase in October and in any case by the end of the year.
Responding to a question during a press conference following the meeting, Fed Governor Janet Yellen said that on October 27 and 28 "there remains a possibility" to tighten even if a press conference is not scheduled on that occasion. The "vast majority" of governors who are members of the Federal Open Market Committee, said Janet Yellen, "believe that economic conditions will require a rate hike by the end of the year".
For the first time in 2015, the decision to leave the cost of money unchanged was not taken unanimously: out of 10 votes, Jeffrey Lacker, president of the Richmond Fed, was against, and would have liked a tightening of 0,25%. Prior to today, five times in a row at Fed meetings I had seen everyone agree. It was the longest time streak since 2009.
The Federal Reserve "discussed the possibility of raising rates" during the meeting that ended today, Yellen specified, but "given the weaknesses abroad and the drop in inflation expectations" it preferred to postpone. The Fed's decisions were also influenced by "increased concerns" about Chinese growth, which caused severe turbulence on international markets.
The decision to keep interest rates unchanged therefore weighed on concerns about the global economy in the face of sustained US growth. The Fed has in fact raised its estimates on US GDP for 2015 to 2,1% compared to the 1,9% indicated in June. Estimates on unemployment have also improved for the current year to 5% from the 5,3% expected in June. Unemployment also improving in 2016 to 4,8%. Instead, cut the GDP estimates for next year to 2,3%.
US economic activity "is expanding" and "will expand at a moderate pace" with labor market indicators "continuing to move towards levels" that the Federal Open Market Committee judges to be in line with its mandate, i.e. full employment and price stability, wrote the Fed in the release on rates which thus remain at the historic low to which they were brought in December 2008, in the midst of the subprime crisis.
US household spending and corporate fixed investment grew moderately and at the same time the residential real estate sector further improved as did the labor market, with “solid” job creation and declining of unemployment. However, exports were "soft", a sign that the economy abroad is perhaps slowing down. For this reason, the Central Bank also wrote in the press release, while assessing the risks to the US outlook as "balanced", the Fed "monitors developments abroad" despite the continued recovery in the US. “Recent global economic and financial developments – warned the Fed – could in a certain sense curb economic activity and could probably put further pressure on inflation in the short term”.
The Fed also noted the "close attention" markets placed on today's decision. Yellen reiterated that, despite the decision not to increase the cost of money, "the outlook has not changed significantly" and an improvement in the US economy and labor market is still expected.
During Janet Yellen's press conference Wall Street lengthened its pace as the Dow Jones rose 1% and the S&P500 1,14%. At the exchange rate level, the euro strengthened against the greenback at 1,1437 dollars. At the close of European markets it stood at 1,1306.
