Gold boosted by Fed interest rate decision

She cited concerns with market instability in Asian markets like China, where a market shakeup late last month sparked by the country deflating its currency, the yuan, caused acute anxiety with global investors and led some to worry that the United States could fall into another recession.

Federal Reserve officials are once again coming around to the bond market’s view that interest rates will stay lower for longer.

The committee has provided no estimate as to when it might consider raising rates, saying it will only do so once it has seen “some further improvement in the labor market and is reasonably confident that inflation will move back to its two percent objective over the medium term”. Lower oil prices are likely to keep a lid on inflation. RBI is to meet later this month to take a call on interest rate.

The Fed is holding the federal funds rate near zero, which is holding all interest rates down.

Fed Chair Janet Yellen was scheduled to hold a press conference later Thursday afternoon to elaborate on the decision.

On Friday morning, fed fund futures reflected only an 18% chance that the FOMC would move, down from 42% just two days ago. Describing it as a “a lot of chatter about nothing”, he said the first hike is a “psychological thing, not an economic thing”.

The global slowdown emanating from Europe and China has recently thrown financial markets into turmoil, a risk specifically raised by the Fed in its statement Thursday.

“The timing will depend on developments in financial conditions and economic data, but we believe an October rate hike is unlikely and the December meeting is a toss-up”.

The risk is the Fed’s cautious commentary could spook markets, even though holding off on rate hikes suggests they are still willing to support markets through this turbulent time.

Nevertheless, 13 of the 17 Fed officials at the meeting indicated they expect a rate hike by the end of this year, majority pointing to a 0.25-0.50 percent range.

“The Fed is painting a very gloomy picture of the US economy”, said Marc Ostwald, strategist at ADM Investor Services global Ltd.in London. The Standard & Poor’s 500 index fell 5.11 points, or 0.3 percent, to 1,990.20, and the Nasdaq Composite index rose 4.71 points, or 0.1 percent, to 4,893.95. It now foresees the economy expanding at just a 2.3 percent pace next year, down from June’s projection of 2.5 percent. The Fed’s forecast still foresees inflation accelerating to a 1.7 percent increase next year, still below its 2 percent target.