U.S. Fed keeps policy interest rates on hold

The U.S. Fed kept its policy interest rates on hold during its meeting today. Today’s decision was not unexpected as the Fed had hiked rates six weeks ago. That signified that the only real uncertainty today was whether the Fed would make any alterations to its guidance on its likely future actions, stated Lloyds Bank in a research report. The FOMC, in its statement, continued to imply that it intends to make “further gradual increases” in policy rates.

“We think that is consistent with another 0.25 percent increase at the next FOMC meeting on 26th September with one further increase likely in December”, stated Lloyds Bank.

The press statement remained greatly unchanged aside from an acknowledgement of the strength of recent economic activity. It had been implied beforehand that the forward guidance on policy might be a bit amended, in line with Fed Chairman Powell’s recent testimony to Congress, to say that there would be further gradual rate rises “for now”. That would not have been a signal that rates would stay on hold in September but could be a ‘dovish’ sign that the Fed was fairly close to a pause in its tightening path as rates approach its estimate of ‘neutral’, said Lloyds Bank.

At 18:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was neutral at -10.4321. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex