Cagey US Fed keeps rates on hold

By Tim Stewart
 — 1 minute read

The US Federal Reserve has kept interest rates on hold once again, providing the market with little guidance in its July statement concerning future rate rises.

US interest rates will remain on hold in July, with the target of 0.25 to 0.50 per cent set to remain until the Fed's September 2016 meeting.

The Federal Open Market Committee's statement on the decision noted that the US labour market has strengthened since June and inflation continues to run below the central bank's target of 2 per cent.


"The Committee continues to closely monitor inflation indicators and global economic and financial developments," said the statement.

Commenting on the decision, State Street's head of global macro strategy, Michael Metcalfe, said there is a "possibility, albeit a slim one" of an interest rate hike in September.

"With financial contagion to the US from Brexit limited, the timing of the next Fed move will be more dependent in the coming quarter than it has been all year," Mr Metcalfe said.

State Street Global Advisors' chief economist, Christoper Probyn, said the uncertainty created by Brexit and the "lacklustre" global outlook stayed the Federal Reserve's hand in July.

"However, if US economic growth remains close to 2 per cent, the unemployment rate continues to drift lower and inflation edges up toward the 2 per cent target, then the Fed should be able to sneak in one hike this year, likely during their December meeting, followed up by two additional hikes in June and December 2017," Mr Probyn said.

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