Stocks slide even as Fed declines to raise rates

In a statement it issued after its meeting ended, the Fed said that while the USA job market is solid, global pressures may “restrain economic activity” and further slow inflation.

At a press conference following the announcement, Fed chair Janet Yellen listed off a number of reasons why the U.S.’s central bank thinks the economy is still too weak for an interest rate liftoff.

EUROPE SLUMPS: Germany’s DAX was down 2.7 percent while the CAC-40 in France fell 2.3 percent.

In maintaining its policy, the Fed is keeping its benchmark short-term rate near zero, where it’s been since the depths of the 2008 financial crisis.

Despite Friday’s decision to hold the hike, it is widely believed a rate increase is on the cards.

“The Fed statement and the comments that followed left everyone a little confused”, Ive said.

The Fed announced Thursday that they would leave interest rates unchanged in September, ending months of speculation but leaving open the possibility to raise them later this year. However, as the United States economy has recovered, the expectation of an interest rate rise has prompted concerns of hefty capital outflows from emerging economies. The Fed will make a decision during their meetings in October and December.

On Friday morning, fed fund futures reflected only an 18% chance that the FOMC would move, down from 42% just two days ago.

The low interest rates also have helped to fuel auto sales, which are supposed to come in at more than 17 million sales this year.

Aegon United Kingdom investment director Nick Dixon says the Fed remains likely to move “in the next few months”, while Prudential Portfolio Management Group senior economist Leila Butt forecasts an increase before the end of the year.

Bond investors seemed cheered by the Fed’s decision to keep rates ultra-low. The one vote was from Jeffrey Lacker who recommended a quarter point raise. Money-market derivatives indicate the fed funds rate will average 0.59 percent a year from now.

David Zahn, head of European fixed income at Franklin Templeton said that there could be more opportunities created for investors when rates do rise.

On real GDP, the following forecast changed were made: Median GDP now 2.1% for 2015, up from 1.9% seen in June….

But the latest economic projections from the Fed pushed that moment further into the future, with inflation not expected to reach the central bank’s 2 per cent target until 2018, even though unemployment was expected to hit a low of 4.8 per cent.