Fed will consider December rate hike

The U.S. Federal Reserve voted Wednesday to keep interest rates unchanged but the odds of a December rate hike appear to have improved.

Inflation should move toward 2 percent annually, and there should be clearer progress in employment, the statement said.

The Fed has held its benchmark overnight federal funds rate in a zero to 0.25 per cent range since December 2008 as it sought to heal the harm done by the deepest recession since the Great Depression.

The two central banks’ are on different levels when it comes to their respective biases – the RBNZ looks more dovish, indicating rates will be cut, and the Fed still suggesting hikes are on the way.

“The committee continues to see the risks to the outlook for economic activity and the labour market as almost balanced”, the Fed said in its statement.

Uncertainty over the timing of rate hikes in the U.S. has caused market volatility and rand weakness.

In addition the FOMC made a particular reference to its December meeting raising the prospect of a first rate rise this year. In its closely scrutinized policy statement Wednesday the Fed gave a more positive assessment of the USA economy and downgraded its fears that global market tumult and worldwide developments would have an appreciable negative impact on growth at home.

A few recent reports have pointed to slowing growth in the United States, while a few foreign economies are seeing weak growth. Policy makers left rates unchanged Wednesday. The Fed also removed a previous warning about slowing global growth.

Fed watchers immediately went to work trying to interpret the Fed statement.

Still, the Fed noted that the economy is expanding only modestly.

Bankrate.com chief analyst Greg McBride tells VOA if the Fed sees stronger economic data over the next six weeks, Fed officials are likely to raise rates at their next meeting in December.

Since the Fed’s last meeting in September, USA equity markets have recovered from an August selloff triggered by fears of a market collapse and economic slowdown in China. As he had in September, Lacker favored a quarter-point rate increase. That could avert a government shutdown and raise the government’s borrowing limit – two threats that concern Fed policymakers.