Fed’s Williams says decision not to raise rates was a ‘close call’

“Leaving United States interest rates at rock bottom could mark a turning point for the relative performance of emerging and developed markets”, said analyst Jasper Lawler at CMC Markets UK.

However, markets reckon the Fed will move later this year, probably in December.

Ouyang Jie, a vice-president at property developer Future Holdings, said Yellen’s remarks underscored China’s increasing role on the world stage. The Fed has held its target for the rate in a range of zero to 0.25 per cent since December 2008. Since then, the economy has almost fully recovered even as pressures from overseas appear to have grown.

“The (Fed) decision to stay pat reveals a new monetary policy rule in place – one that amplifies the importance of global and financial market developments”, William Lee, an economist at Citigroup, told clients in a report.

“First, the USA central bank is responding to global concerns, especially in emerging markets and China“. And low oil prices and a high-priced dollar have kept inflation undesirably low.

“Second, they have revised down their growth and inflation expectations, a signal that they are concerned that all is not well with the USA economy either”.

Fed chair Janet Yellen speaks during a press conference in Washington DC, September 17. Low interest rates have led many borrowers to stake their necks in trillions of dollars in debt.

The Dow Jones Industrial Average dropped 289.95 points, or 1.74 percent, to 16,384.79.

“When USA interest rates rise, capital flows could reverse, weakening emerging market currencies and making dollar-denominated debts harder to service”. She has stressed that any rate increases will likely be modest and gradual.

Earlier Saturday, Jeffrey Lacker, the president of the Richmond Fed, released a statement explaining why he was the sole dissenting vote in favor of a rate hike this week.

The Fed meets again in late October.

According to Fed meeting documents, 13 of 17 policy makers still expect rates to increase in 2015.

The Fed’s preferred gauge of inflation has remained under its goal since April 2012 and rose 0.3 percent in the year through July.

She described Canada as “an important trading partner of ours that has been negatively affected by declining commodity prices, declining energy prices”.

The Fed’s two major objectives are to achieve maximum employment and stable inflation, which it targets at 2 percent.

The new forecast has unemployment dropping to 5 percent by the end of this year, down from 5.3 percent in June.

Some analysts believed that fears about global growth set the tone after the Fed delayed normalizing monetary policy.

Yet the Fed’s influence on many consumer and business rates is only indirect.