- Many investors are watching the Fed for signs of when it may raise interest rates
- _77651818_tv023826786.jpg (32.16 KiB) Viewed 9891 times
'US Fed offers no hint on rate rise as stimulus ends
4 minutes ago
The US Federal Reserve has reiterated that it will raise interest rates once a "considerable time" has passed after its stimulus programme ends in October.
The announcement came at the end of a two-day meeting of the central bank's policy committee in Washington DC.
Investors have been anxious about when the Fed will raise short-term interest rates, which have been at zero since late 2008.
US markets were mixed on the news.
Wednesday's announcement of the end of the stimulus programme was widely expected.
The Fed has been buying billions of dollars of bonds in an effort to keep long-term interest rates low and thus boost spending.
However, as the US economy has picked up steam, the central bank has said that extra support is no longer necessary.
No phrase change
Now, analysts, investors, and markets around the world are looking to find out when the Fed will raise its short-term interest rate.
The Fed first inserted the phrase "considerable time" into its statements in December 2012.
However, it was only when challenged in March of this year about the meaning of the phrase that markets became spooked. Fed chairwoman Janet Yellen indicated "considerable time" meant roughly six months - a statement from which she later backtracked.
In keeping the language surrounding the rate rise the same at the end of this September meeting, the mystery of when rate rise will occur has persisted.
Divided board
In a rare display of dissent, two members of the Fed's policy making committee departed publicly from the decision to keep the language surrounding interest rate rises the same.
Fed board members Richard Fisher and Charles Plosser indicated they thought "the continued strengthening of the real economy, improved outlook for labour utilisation and for general price stability, and continued signs of financial market excess, will likely warrant an earlier reduction in monetary accommodation" than the Fed was currently indicating in its statement.
So-called "hawks" have warned that if the Fed keeps its stance too accommodative for too long, it could encourage reckless spending which in turn could lead to a faster-than-expected rise in prices.
However, the most recent data on inflation released on Wednesday by the US labour department showed a surprise drop in prices.
Prices fell 0.2% in August from July, their first decline in more than a year, and annual inflation is currently at 1.7% - well below the Fed's target.