Fed Holds But Points to Diminishing Risks

The Federal Reserve acknowledged an improving economy, but gave no insight into when it might hike rates, leaving markets to continue to focus on a December time frame as most likely.

Some economists said the Fed left the door open for a September hike, but market reaction was muted and strategists said it still looks like the markets believe December is more likely.

“They upgraded the economy a little bit, which they should have because the data is better. They maintain that they’re monitoring global economic and financial conditions. They didn’t hint at September at all. I think that gets everyone focused on Jackson Hole to see what’s next,” said John Canally, market strategist and economist at LPL Financial.

The Fed’s annual symposium in Jackson Hole, Wyoming, on Aug. 26 is seen as the next chance for it to deliver a message about policy. The central bank’s chair, Janet Yellen, is scheduled to speak and Fed chairs have been known to make important policy comments at that gathering of U.S. and international bankers.

“If asked about September, they would say every meeting is live,” Canally said. “But maybe they’re preparing markets for thinking about perhaps raising rates in December.”

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza