Investors are now watching the Fed’s comments on inflation and whether it will raise interest rates again in December. US Treasury yields fell on Thursday morning after the Federal Reserve kept interest rates unchanged at its October meeting on Wednesday.
Fed says more data needed to control inflation
The Federal Reserve voted on Wednesday to keep its key overnight interest rate in the range of 3.75% to 4%.
However, the central bank said inflation remained high, showing that policymakers still have concerns about rising prices, according to its post-meeting statement. The Federal Reserve said it needed more information before deciding what action to take on interest rates. “The accumulation of more information will help the Committee determine the policy stance appropriate to ensure a timely return of inflation to the Committee’s 2 percent goal,” the central bank said in its statement on Wednesday. Speaking to reporters after the meeting, Federal Reserve Chair Kevin Warsh said policymakers had not decided on a fixed path for interest rates.
He said the Fed would have clearly announced its plans if it had reached a firm decision on monetary policy, according to CNBC.
Investors see softer path for future rate hikes
Ali Hassan, a portfolio manager at Thornburg Investment Management, said markets appeared to view the Fed’s latest comments as pointing towards a softer interest rate outlook rather than signalling a fresh inflation scare. Hassan said markets still expected a rate hike in December but were less certain about whether the Fed would raise rates again after that. This suggests investors are trying to balance the possibility of another rate increase against the chance that the central bank may take a less aggressive approach later.
He said investors had reduced their expectations for rate hikes further into the future, according to a note published on Wednesday, according to CNBC.
