Asian stocks rise after Fed leaves US rates unchanged

“They’ve acknowledged the negative rate policy can hurt bank profits, and these measures they’ve announced today are in a way trying to offset some of that negative impact”.

“Wage, growth and inflation data will need to rise to trigger action, but that’s a decent bet for December”. Perhaps the Kiwi will be knocked from its lofty perch (NZ$0.7320)? Fed chief, Janet Yellen, said the economy can still grow at the current rate. The research firm concludes that central banks can’t fix the shape of the yield curve “rather like squeezing a balloon full of air in one place [it] simply pushes out the balloon somewhere else”.

While the risks to economic outlook were roughly “balanced”, the US Fed maintained rates as inflation continued to run below its 2% target and members saw room for improvement in the labour market. That’s the interest rate level the Fed reckons will be enough to keep growth on an ticking over.

The Fed kept interest rates unchanged on Wednesday, despite hints of a hike later in the year. The Hang Seng Index closed up +0.6%. The eurozone economy is growing slowly, but inflation remains well far below the ECB’s 2 percent annual target. There are two more meetings to go.

The Dow Jones industrial average .DJI was up 125.33 points, or 0.69 percent, to 18,419.03, the S&P 500 .SPX gained 15.04 points, or 0.7 percent, to 2,178.16 and the Nasdaq Composite .IXIC added 44.34 points, or 0.84 percent, to 5,339.52. The market has also been bolstered by strong Chinese money inflows.

Inflation targeting: Overall, consumer price inflation was less than 1 per cent over the 12 months ending in July, which is still short of the Fed’s 2 per cent objective. Brent crude futures had finished $1.17 higher at $47.05 per barrel. Its biggest support is coming from the oil service worker strike in Norway that risks impacting output in Western Europe’s biggest crude producer.

After the Fed, it’s on to Algiers for next week’s OPEC meeting (Sept 27). No wonder Third Point hedge-fund founder Dan Loeb, speaking at a Reuters Newsmaker event earlier on Wednesday, argued that loose monetary policy was like a drug and “we must take the crack pipe away”. The BOJ´s announcement initially sent the dollar up more than 1 percent to 102.79 yen, though the gains unravelled as investors realized that the overall market impact was far from obvious. However, it emphasized that it sees the rebound continuing through the second half of the year. It has subsequently declined to minus -0.035% ahead of the U.S open. Benchmark U.S. crude added 84 cents, or 1.9 percent, to $44.89 a barrel in NY. The BOJ’s policy shift is unlikely to prevent the yen from rising further, said Heng Koon How, senior FX investment strategist for Credit Suisse.

Many in the financial industry see the central bank’s new policy framework to mean it will let yields on long-tenor JGBs, those with maturities of 10 years and longer, rise while keeping down short-term rates to stimulate borrowing. Futures prices indicate the chance of a rate hike by December climbed to 61 per cent, from 52 per cent a week earlier.