Dow Jones Stumbles and Reverses on Fed Unchanged Interest Rate
The US federal reserve released their quarterly interest rate decision in the United States. They left rates on hold for the next period but hinted at a rate hike maybe on the cards before the end of this year.
Once again the Federal Reserve suggested that interest rates are due to rise again. Even though inflation has been falling this year, which was an admitted surprise, reporters were told on Wednesday that the economy is strong enough to handle another hike. Janet Yellen suggested they expect that the strength of the economy will warrant further increases in rates.
The federal reserve also suggested that the economy is strong enough to begin reducing the balance sheet. The $4.5 trillion balance sheet which came about from the stimulus program when the economy and recession hit, will begin unwinding in October.
According to the Fed. Business is getting stronger, hiring is strong, people are spending once again and projected a healthy 2.4% growth this year.
While the signs for further interest rate increases are apparent the Fed did not change the base rate yesterday. We can probably expect another rate increase by the end of this year, and three more are expected as we move into 2018.
Even though the stock market took an initial small tumble on the news that rates were left on hold, they soon recovered and ended higher, with the Dow Jones making (yet) another all time high.
Gold prices reacted strongly to the downside on this news. It immediately fell and broke the magical $1300 barrier. Whilst $1300 is not a major support, it is a round number and a significant number to break.It remains to be seen whether Gold can recover and attack the August highs again.
US dollar was strong after their interest rate announcement. US dollar versus the Japanese yen rose 112.50, and seems like the trend is most certainly up for the foreseeable future.
Pete Southern is an active trader, chartist and writer for market blogs. He is currently technical analysis contributor and admin at this here blog.
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