Jeffrey Qián 錢 曄 // 778-238-2014 // info@jeffreyqian.com

US Federal Reserve Interest Rate Decision

The US Federal Reserve ("the Fed") opted to leave its key interest rate unchanged at its current level of between zero and 0.25 per cent. In its accompanying statement, the Fed cited that inflation continues to run below the Fed's long-run objective of 2 per cent and US economy activity was expanding at a moderate pace, hampered by a high dollar and attendant softness in exports. The Fed anticipates that it will only be appropriate to raise its target rate once the labor market shows further improvement and it can be reasonably confident that inflation will move back to its 2 per cent target over the medium term.

Most economists agreed that the Fed was unlikely to raise rates at the October meeting, preferring to wait until December before initiating a lift-off from the zero rate policy that has prevailed since 2008. A global economic slowdown since the summer has provided a significant amount of cover for the Fed to put off raising rates until it can better grasp the impact of slower global growth and a high US dollar on the US economy. The Fed also wants to be "reasonably confident" that its preferred measure of inflation, which is currently tracking at just 1.4 per cent, will  reach 2 per cent over the medium-term, usually defined as about 2 years.  Our modeling suggests a somewhat low-probability that inflation will reach 2 per cent before the end of 2016.  If that holds, and the Fed puts off tightening longer than currently expected, key bond yields in both the US and Canada should remain low, meaning low mortgage rates will continue throughout next year. 


Comments:
No comments

Post Your Comment:

* indicates required fields.
Your Name: *
Please note, your email will not be shown publicly
Your Email (will not be published): *
Comment: *
Please type the text as it appears above:
The data relating to real estate on this website comes in part from the MLS® Reciprocity program of either the Real Estate Board of Greater Vancouver (REBGV), the Fraser Valley Real Estate Board (FVREB) or the Chilliwack and District Real Estate Board (CADREB). Real estate listings held by participating real estate firms are marked with the MLS® logo and detailed information about the listing includes the name of the listing agent. This representation is based in whole or part on data generated by either the REBGV, the FVREB or the CADREB which assumes no responsibility for its accuracy. The materials contained on this page may not be reproduced without the express written consent of either the REBGV, the FVREB or the CADREB.