Fed Puts US Interest Rates On Hold Again

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The US Federal Reserve has voted to peg official interest rates again despite clamour on the markets expecting a hike.

The US official interest rate stays at 0.5%, where it has sat since December last year.

However, the Fed has dropped some strong hints that interest rates will go up before the end of the year.

In the vote, three of the 10 members plumped for a rise, but delving into the minutes of the meeting, the committee is clear that an increase will arrive before the end of the year.

“We judged that the case for an increase has strengthened, but decided for the time being to wait for further evidence of continued progress toward our objectives,” said Fed chair Janet Yellen.

“Our current policy should help move the economy toward our statutory goals of maximum employment and price stability.

Growth forecast cut

“Overall, we expect that the economy will expand at a moderate pace over the next few years.”

The Fed is running out of time to impose the rate rise.

Traditionally, the rate setters make no changes in the month of a presidential election – which is November.

That just leaves October and December. The last rate rise was shortly before Christmas 2015.

Despite the Fed statement, the Organisation of economic Co-Operation and Development (OECD) has cut forecasts for economic growth for the USA.

The data was released at the same time as the Fed met.

The OECD has downgraded US economic growth predicted as 1.4% by 0.4% for 2016 and down 0.1% to 2.1% for next year. The 2015 figure was 2.6%.

Japan banks on 0% bonds

Meanwhile, the Bank of Japan has announced a policy of capping yields on 10-year government bonds to 0% in a bid to kick away from deflation dogging the economy.

The bank has also set short-term rates at below zero.

Critics suggest the bank is moving too far towards micromanaging the economy and warn that no other country has tried to beat inflation this way, so no one knows if the plan will work.

The bank has tried to stimulate the economy with quantitative easing, printing billions of yen to no avail.

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