World markets buoyed on hopes Fed will hold fire on rates

The dollar sank to a seven-week low against a basket of currencies on Wednesday as more signs of slowing growth in the United States and China raised doubts the US Federal Reserve will raise interest rates later this year.

Federal Reserve officials have created confusion with conflicting statements about the central bank’s plans for raising interest rates, one of the Fed’s top officials said Thursday. That accords with market price approximating around a 5% chance of a hike. But further progress is dependent on important structural issues that are not easily addressed by Fed policy.

When it comes to the USA economy, the case for a rate hike has been challenged by recent indicators of consumer weakness, and its impact on retailers.

Shanghai finished 1.60 percent higher, with dealers betting on China’s leaders announcing a new round of measures to shore up the stuttering economy.

Ms. Mester also said that politics don’t play a role in the Fed’s monetary-policy decisions.

After a frustratingly slow post-crisis start, the USA economy has had an impressive run of job creation.

He added that it was “reasonable” to expect there would be different views among Fed policymakers on when the central bank should begin the process of tightening policy, given the uncertainty in the global economy.

“Without question, the global economy, the financial markets and liquidity in the financial system were all more stable and supportive of a policy change many months ago, when the Fed’s employment target was clearly on its way to being met. Now, conditions are more hard, highlighting the conundrum the Fed is in”, said Mr Rick Rieder, a senior BlackRock fund manager.

“While it may look like core inflation is moving towards that desired 2.0-percent mark with this report, the mix is not necessarily what the Fed expected”, said Sophia Kearney-Lederman, an economic analyst at FTN Financial.

“The comments by the Washington-based governors also reflect internal divisions; they were striking back at regional Fed bank presidents, who tend to speak out more frequently and have been among the most outspoken advocates for rate increases this year”. Bullard, however, admitted it would be tough to raise rates in October since not much time has passed since the September meeting. It was last up almost 1 percent at $1.1487.

Separate figures showed the number of Americans applying for jobless benefits fell to its lowest level since 1973 last week.

“I think the market is disillusioned by the Fed because of the confusion they’ve created in investors’ minds”.