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| Federal Reserve is 'closely monitoring' global economy as it leaves rates on hold - business live | Federal Reserve is 'closely monitoring' global economy as it leaves rates on hold - business live |
| (35 minutes later) | |
| 8.48pm GMT | |
| 20:48 | |
| Our news story on the Fed decision is now live: | |
| Related: Federal Reserve keeps interest rates unchanged while monitoring markets | |
| Here’s a flavour: | |
| The Federal Reserve is keeping a key interest rate unchanged while pledging to closely monitor developments in the global economy and financial markets. | |
| In December the central bank made the decision to raise rates for the first time since the recession. Stock markets have been turbulent across the world since the move, and all the US markets entered negative territory again after the announcement. | |
| The policymakers left their benchmark rate unchanged in a range of 0.25% to 0.5%. Until December, they had kept that rate at record lows. | |
| The Fed noted in its latest policy statement that economic growth has slowed since it raised rates from record lows: “The [Fed] is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.” | |
| The changes in its statement signaled that the Fed could be prepared to slow future rate hikes if recent market turbulence and global weakness do not abate..... (click here for more). | |
| 8.07pm GMT | 8.07pm GMT |
| 20:07 | 20:07 |
| The selloff is picking up pace, with the Dow Jones industrial average now down over 1%. | The selloff is picking up pace, with the Dow Jones industrial average now down over 1%. |
| That’s not all down to the Fed, though. Apple has shed 6% after last night’s disappointing results showed that iPhone sales have slowed. | That’s not all down to the Fed, though. Apple has shed 6% after last night’s disappointing results showed that iPhone sales have slowed. |
| Market Alert » Dow falls to new session low, down 235 points: https://t.co/FOojOlLKR6 | Market Alert » Dow falls to new session low, down 235 points: https://t.co/FOojOlLKR6 |
| 8.01pm GMT | 8.01pm GMT |
| 20:01 | 20:01 |
| Paul Ashworth, chief US economist at Capital Economics, also points out that the Fed is no longer willing to describe the risks to the outlook as “balanced” (as covered here). | Paul Ashworth, chief US economist at Capital Economics, also points out that the Fed is no longer willing to describe the risks to the outlook as “balanced” (as covered here). |
| He writes: | He writes: |
| As expected, the new statement acknowledged the apparent slowdown in activity growth in the fourth quarter. The growth of consumption and business investment is now described as “moderate” whereas back in December it was described as “solid”. The slowdown in inventory investment also receives an explicit reference. At the same time, the Fed stressed that labourmarket conditions “improved further” with “strong” job gains. | As expected, the new statement acknowledged the apparent slowdown in activity growth in the fourth quarter. The growth of consumption and business investment is now described as “moderate” whereas back in December it was described as “solid”. The slowdown in inventory investment also receives an explicit reference. At the same time, the Fed stressed that labourmarket conditions “improved further” with “strong” job gains. |
| Ashworth reckons that economic data, and financial markets, may not improve in time to allow a rates to rise in March. But he still expects a string of hikes later in the year. | Ashworth reckons that economic data, and financial markets, may not improve in time to allow a rates to rise in March. But he still expects a string of hikes later in the year. |
| Nevertheless, we still think that once the worst fears about China blow over and US economic growth rebounds, the Fed will end up raising interest rates more rapidly that expected in the second half of this year. We expect the fed funds rate to reach 1.50% to 1.75% by end-2016. | Nevertheless, we still think that once the worst fears about China blow over and US economic growth rebounds, the Fed will end up raising interest rates more rapidly that expected in the second half of this year. We expect the fed funds rate to reach 1.50% to 1.75% by end-2016. |
| 7.58pm GMT | 7.58pm GMT |
| 19:58 | 19:58 |
| The Fed is primarily worried about China, argues Worth Wray, chief economist at wealth management firm Evergreen GaveKal. | The Fed is primarily worried about China, argues Worth Wray, chief economist at wealth management firm Evergreen GaveKal. |
| When the #Fed says it is "monitoring global economic & financial developments," it largely means #China & the #RMB. https://t.co/TFeq8BK5qX | When the #Fed says it is "monitoring global economic & financial developments," it largely means #China & the #RMB. https://t.co/TFeq8BK5qX |
| 7.50pm GMT | 7.50pm GMT |
| 19:50 | 19:50 |
| One expert reckons the Fed’s statement guarantees more market turbulence in the next six weeks: | One expert reckons the Fed’s statement guarantees more market turbulence in the next six weeks: |
| "Fed is almost certain to hike if markets stabilize in the next month and half, but might not hike if markets continue to slide..." | "Fed is almost certain to hike if markets stabilize in the next month and half, but might not hike if markets continue to slide..." |
| "...How can stocks and commodities possibly rally in response to that message?"—FTN's Chris Low | "...How can stocks and commodities possibly rally in response to that message?"—FTN's Chris Low |
| 7.47pm GMT | 7.47pm GMT |
| 19:47 | 19:47 |
| This month’s Fed meeting was always going to be all about the statement, given the FOMC bit the bullet and raised borrowing costs for the first time since the crisis in December. | This month’s Fed meeting was always going to be all about the statement, given the FOMC bit the bullet and raised borrowing costs for the first time since the crisis in December. |
| The tone of the Fed’s comments set the tone for the next few weeks -- and the statement is being taken as quite dovish. | The tone of the Fed’s comments set the tone for the next few weeks -- and the statement is being taken as quite dovish. |
| Chris Beauchamp, Senior Market Analyst at City trading firm IG, explains: | Chris Beauchamp, Senior Market Analyst at City trading firm IG, explains: |
| Markets got the more dovish tone they were hoping for, with the Fed noting slowing economic growth and tipping its hat towards the idea that inflation won’t rise towards 2% as fast as it thought in December. This doesn’t mean a March move is out of the question, but the reference to global economic developments means that there will have to be plenty more improvement in the US economy before one is a definite possibility. | Markets got the more dovish tone they were hoping for, with the Fed noting slowing economic growth and tipping its hat towards the idea that inflation won’t rise towards 2% as fast as it thought in December. This doesn’t mean a March move is out of the question, but the reference to global economic developments means that there will have to be plenty more improvement in the US economy before one is a definite possibility. |
| With the risks to the economy no longer seen as ‘balanced’ this is a Fed committee drawing in its horns. It was never going to admit that December’s move was a mistake, but today’s statement acknowledges that it is not time to get carried away with rate hikes. | With the risks to the economy no longer seen as ‘balanced’ this is a Fed committee drawing in its horns. It was never going to admit that December’s move was a mistake, but today’s statement acknowledges that it is not time to get carried away with rate hikes. |
| 7.36pm GMT | 7.36pm GMT |
| 19:36 | 19:36 |
| Fed decision: instant reaction | Fed decision: instant reaction |
| Matthew Boesler of Bloomberg says the Fed is taking the recent stock market losses seriously, without panicking. | Matthew Boesler of Bloomberg says the Fed is taking the recent stock market losses seriously, without panicking. |
| Clear comment from the FOMC on financial markets without going so far as it did in Sept. to suggest that economic outlook is in jeopardy | Clear comment from the FOMC on financial markets without going so far as it did in Sept. to suggest that economic outlook is in jeopardy |
| Brett House, chief economist of US investment management firm Alignvest, reckons the Fed won’t raise rates four times this year (as it had been expecting). | Brett House, chief economist of US investment management firm Alignvest, reckons the Fed won’t raise rates four times this year (as it had been expecting). |
| Mildly dovish #Fed #FOMC statement knocks out 4th 2016 rate hike; equivocates on graduals hikes vs global developments. Mkts go sideways. | Mildly dovish #Fed #FOMC statement knocks out 4th 2016 rate hike; equivocates on graduals hikes vs global developments. Mkts go sideways. |
| Financial commentator Bobi Petrov reckons rates will remain on hold at the Fed’s next meeting, in early March. | Financial commentator Bobi Petrov reckons rates will remain on hold at the Fed’s next meeting, in early March. |
| FOMC signals no imminent change in FF rates in March closely monitors global economic and financial developments | FOMC signals no imminent change in FF rates in March closely monitors global economic and financial developments |
| Updated | Updated |
| at 7.37pm GMT | at 7.37pm GMT |
| 7.31pm GMT | 7.31pm GMT |
| 19:31 | 19:31 |
| The Fed also doesn’t see inflation roaring away this year - hardly surprising, given the oil price tumble. | The Fed also doesn’t see inflation roaring away this year - hardly surprising, given the oil price tumble. |
| Tonight’s statement says: | Tonight’s statement says: |
| Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further | Inflation is expected to remain low in the near term, in part because of the further declines in energy prices, but to rise to 2 percent over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further |
| 7.28pm GMT | 7.28pm GMT |
| 19:28 | 19:28 |
| This is a useful tool, showing some of the changes to this month’s statement: | This is a useful tool, showing some of the changes to this month’s statement: |
| How exactly the Federal Reserve's January statement changed from December https://t.co/W3S7hz9wAK pic.twitter.com/NHdUQOVP6B | How exactly the Federal Reserve's January statement changed from December https://t.co/W3S7hz9wAK pic.twitter.com/NHdUQOVP6B |
| Note how jobs growth is now “strong” after this month’s blowout non-farm payroll report showed 292,000 new hirings in December. | Note how jobs growth is now “strong” after this month’s blowout non-farm payroll report showed 292,000 new hirings in December. |
| 7.22pm GMT | 7.22pm GMT |
| 19:22 | 19:22 |
| Stock market falls after Fed decision | Stock market falls after Fed decision |
| Stocks are falling on Wall Street as traders digest tonight’s statement. | Stocks are falling on Wall Street as traders digest tonight’s statement. |
| Not immediately clear why - but investors may be concerned that the Fed has dropped that line about economic risks being balanced. | Not immediately clear why - but investors may be concerned that the Fed has dropped that line about economic risks being balanced. |
| #DOW drops 144 points in a minute following Fed's decision to keep rates unch. Unknown reason. Earlier gains wiped out. #FED JG | #DOW drops 144 points in a minute following Fed's decision to keep rates unch. Unknown reason. Earlier gains wiped out. #FED JG |
| Dow slides nearly 130 points again, other indexes also gyrating after Fed decision https://t.co/FOojOlLKR6 pic.twitter.com/JJOeKfAbj5 | Dow slides nearly 130 points again, other indexes also gyrating after Fed decision https://t.co/FOojOlLKR6 pic.twitter.com/JJOeKfAbj5 |
| One notable element of the new Fed statement -- it no longer says risks to the economy are balanced https://t.co/Zkh3znDzHQ | One notable element of the new Fed statement -- it no longer says risks to the economy are balanced https://t.co/Zkh3znDzHQ |
| 7.18pm GMT | 7.18pm GMT |
| 19:18 | 19:18 |
| There’s a significant change between this statement and December’s one. The Fed has dropped the line saying that the risks to economic activity and the labour market are “balanced”. | There’s a significant change between this statement and December’s one. The Fed has dropped the line saying that the risks to economic activity and the labour market are “balanced”. |
| That suggests the Fed thinks the situation has become unbalanced.... | That suggests the Fed thinks the situation has become unbalanced.... |
| With #Fed omitting line in statement about risks being 'balanced' regarding outlook, turns into a fairly dovish (but expected) #FOMC | With #Fed omitting line in statement about risks being 'balanced' regarding outlook, turns into a fairly dovish (but expected) #FOMC |
| 7.15pm GMT | 7.15pm GMT |
| 19:15 | 19:15 |
| You can read the statement online, here. | You can read the statement online, here. |
| 7.15pm GMT | 7.15pm GMT |
| 19:15 | 19:15 |
| The Fed is also sticking to its view that interest rates will only rise gradually, meaning borrowing costs will remain below the long-term average for some time. | The Fed is also sticking to its view that interest rates will only rise gradually, meaning borrowing costs will remain below the long-term average for some time. |
| But it all depends on the data..... | But it all depends on the data..... |
| However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. | However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data. |
| 7.14pm GMT | 7.14pm GMT |
| 19:14 | 19:14 |
| The decision was unanimous -- all 10 members of the Federal Reserve Open Market Committee agreed to leave borrowing costs unchanged. Again, that’s not a surprise. | The decision was unanimous -- all 10 members of the Federal Reserve Open Market Committee agreed to leave borrowing costs unchanged. Again, that’s not a surprise. |
| 7.11pm GMT | 7.11pm GMT |
| 19:11 | 19:11 |
| The US central bank also reckons that the American economy is continuing to heal. | The US central bank also reckons that the American economy is continuing to heal. |
| The statement says: | The statement says: |
| Household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further; however, net exports have been soft and inventory investment slowed. | Household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further; however, net exports have been soft and inventory investment slowed. |
| A range of recent labor market indicators, including strong job gains, points to some additional decline in underutilization of labor resources | A range of recent labor market indicators, including strong job gains, points to some additional decline in underutilization of labor resources |
| 7.04pm GMT | 7.04pm GMT |
| 19:04 | 19:04 |
| Fed is watching global economy and markets closely | Fed is watching global economy and markets closely |
| The Federal Reserve says it is keeping a close eye on the global economy, and financial markets. | The Federal Reserve says it is keeping a close eye on the global economy, and financial markets. |
| In tonight’s statement, is says: | In tonight’s statement, is says: |
| The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook. | The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook. |
| That means the Fed is considering the impact on recent market turmoil, and the fall in the oil price, on the US economy and the path of inflation. | That means the Fed is considering the impact on recent market turmoil, and the fall in the oil price, on the US economy and the path of inflation. |
| Updated | Updated |
| at 7.10pm GMT | at 7.10pm GMT |
| 7.00pm GMT | 7.00pm GMT |
| 19:00 | 19:00 |
| Federal Reserve leaves interest rates unchanged | Federal Reserve leaves interest rates unchanged |
| In the least surprising news of 2016, the US central bank has left borrowing costs unchanged. | In the least surprising news of 2016, the US central bank has left borrowing costs unchanged. |
| The policy rate remains at 0.25% to 0.5%. | The policy rate remains at 0.25% to 0.5%. |
| US Fed: Keeps Fed Funds Range Unchanged At 0.25-0.50% | US Fed: Keeps Fed Funds Range Unchanged At 0.25-0.50% |
| 6.58pm GMT | 6.58pm GMT |
| 18:58 | 18:58 |
| OK, it’s nearly time for the Federal Reserve to announce this month’s monetary policy decision. | OK, it’s nearly time for the Federal Reserve to announce this month’s monetary policy decision. |
| Remember, it’s all about the Fed’s statement - Wall Street is certain that Janet Yellen isn’t going to raise interest rates again..... | Remember, it’s all about the Fed’s statement - Wall Street is certain that Janet Yellen isn’t going to raise interest rates again..... |
| Markets price zero probability for #Fed rate hike today, only 27% probability for March hike. pic.twitter.com/PP2neJ0IZc | Markets price zero probability for #Fed rate hike today, only 27% probability for March hike. pic.twitter.com/PP2neJ0IZc |
| 5.41pm GMT | 5.41pm GMT |
| 17:41 | 17:41 |
| The FOMC projected 100 bps (4 quarter percent hikes) in 2015. Swaps show market pricing in 1: pic.twitter.com/XQjugbfsYU | The FOMC projected 100 bps (4 quarter percent hikes) in 2015. Swaps show market pricing in 1: pic.twitter.com/XQjugbfsYU |
| 5.34pm GMT | 5.34pm GMT |
| 17:34 | 17:34 |
| European markets close higher | European markets close higher |
| Ahead of the Federal Reserve’s interest rate setting meeting, and following a rise in the oil price, European shares have ended the day on a positive note. | Ahead of the Federal Reserve’s interest rate setting meeting, and following a rise in the oil price, European shares have ended the day on a positive note. |
| With hopes of co-operation between oil producers - notable Opec and Russia - to tackle the issue of oversupply, Brent crude has jumped 3.6% to $32.96. The rise comes despite a jump in US crude inventories. The closing scores showed: | With hopes of co-operation between oil producers - notable Opec and Russia - to tackle the issue of oversupply, Brent crude has jumped 3.6% to $32.96. The rise comes despite a jump in US crude inventories. The closing scores showed: |
| On Wall Street, the Dow Jones Industrial Average is currently 34 points or 0.22% higher. | On Wall Street, the Dow Jones Industrial Average is currently 34 points or 0.22% higher. |
| 5.02pm GMT | 5.02pm GMT |
| 17:02 | 17:02 |
| Another reason for the day’s strength in the oil price: Russia has said it discussed co-operation with Opec over crude prices. Reuters reports: | Another reason for the day’s strength in the oil price: Russia has said it discussed co-operation with Opec over crude prices. Reuters reports: |
| Russia’s energy ministry said possible coordination between Russia and the Organization of Petroleum Exporting Countries (OPEC) was discussed at a meeting with Russian oil companies on Wednesday. | Russia’s energy ministry said possible coordination between Russia and the Organization of Petroleum Exporting Countries (OPEC) was discussed at a meeting with Russian oil companies on Wednesday. |
| The ministry said the discussion was related to unfavourable oil prices. | The ministry said the discussion was related to unfavourable oil prices. |
| There is also talk of an emergency Opec meeting in February. | There is also talk of an emergency Opec meeting in February. |
| Updated | Updated |
| at 5.11pm GMT | at 5.11pm GMT |