FOMC Leaves Interest Rates at 0.75%; Subdued Reactions in Stocks, Forex and Metals Markets

The Board of Governors of the FOMC voted unanimously today to leave interest rate paid on reserve balances at 0.75 percent.

FOMC’s decision to leave interest rates unchanged was not unexpected by market participants and economists; reactions in currency, equity and bond markets were rather subdued.

Per the press release, the Federal Open Market Committee sees continued improvements in labour markets and economic activity in the United States:
“Job gains remained solid and the unemployment rate stayed near its recent low.“
While inflation has risen somewhat over the past few quarters, the Committee said it’s still bellow the recommended “2 percent longer-run objective.”

The Committee also said it believes the 2 percent target will eventually be reached as the economy continues to improve in 2017.
“The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.”
Equities finished the day with small to moderate gains; Dow Jones Industrial Average closed at 19,890.04, a gain of 0.14 percent; S&P 500 closed at 2,279.55, a 0.03% gain; Nasdaq closed at 5,642.65, a gain of 0.50%.

Gold futures traded as low as $1199.70 before the interest rate decision, but gained back most of the day’s losses in the hour following the FOMC announcement, closing at $1210.70.

The U.S. dollar index hit a low of 99.54 in the aftermath of the FOMC announcement. The index closed at 99.72 and a small gain of 0.21% for the day.

The greenback posted modest gains against other major currencies:

-The euro lost 0.30% against the dollar to close at 1.0770.
-The U.S. dollar gained 0.40% against the Japanese yen.
-The British pound gained 0.55% against the greenback, closing at 1.2658.
-The Australian dollar gained 0.08% against the U.S. dollar to close at 0.7584.
-The Canadian dollar lost 0.05% against the greenback.

Fed image by Kurtis Garbutt