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US Federal Reserve meeting opens, markets forecast no policy rate hike

US stocks were slightly higher Tuesday as the Fed's two-day monetary policy meeting got underway. Photograph: (Others)

WION Washington, DC, United States Sep 20, 2016, 07.40 PM (IST)
Global investors are awaiting the outcomes of the US Federal Reserve policy meeting that began on Tuesday. 

Policy-settling Federal Open Market Committee is in the same position it was in each of its five previous meetings this year, owing to weak inflation and consumer spending data. 

Federal Reserve chair Janet Yellen made encouraging remarks in August that conditions were ripe for an increase, leading the markets to believe that the benchmark federal funds rate would be lifted this week, from its current 0.25-0.50 percent level.

But weak economic data since then has led widespread expectation that the Federal Reserve will keep interest rates locked at an ultra-low level.

"It seems like every time the Fed places a rate hike 'on the table,' the economic data quickly weaken, making the chances of an actual rise ever rockier. So it appears set to go with September," said Pedro da Costa of the Peterson Institute for International Economics.

The Fed has struggled to get away from its extraordinarily loose monetary policy dating back to the 2008 crisis. But the US and global economic uncertainty continue to bind its hands. 

"We do not expect a change in Fed policy, and we continue to forecast no policy rate changes for the balance of the year," said Jason Schenker of Prestige Economics in a client note.

Few expect a rate hike at the end of the two-day meeting on Wednesday. Most analysts were setting their sights on an increase possibly at the December meeting. 

(WION with inputs from agencies)
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