Fed report sinks US dollar, stocks
January 28, 2016, 12:01 am

The Federal Reserve appeared to indicate that improving domestic economic figures would have a greater effect on the decision to raise interest rates in March [Xinhua]

Global markets had been closely watching the meeting of the Fed’s Open Market Committee (FOMC) for strong indication whether it would raise interest rates in March given the current volatility and low oil prices.

While the FOMC statement released on Wednesday appeared somewhat cautious, it did not focus on global economic turmoil as traders had hoped but instead highlighted the positives in the US economy.

“Information received since the Federal Open Market Committee met in December suggests that labor market conditions improved further even as economic growth slowed late last year. Household spending and business fixed investment have been increasing at moderate rates in recent months, and the housing sector has improved further; however, net exports have been soft and inventory investment slowed,” the FOMC statement said.

While acknowledging that low inflation levels – blamed on low oil prices, which it said were “transitory” – were concerning, the FOMC statement indicated that interest rates would remain as is, with monetary policy remaining accomodative.

It did not rule out another rate hike in March, contrary to the hopes of some investors who fear another increase in interest points could further add fire to an already tumultuous global market.

That played out on Wall Street Wednesday as all major indices at the NYSE fell into the red.

The Nasdaq Composite was down 2.48 per cent, while the Dow Jones Industrial average slipped 1.38 per cent.

The S&P 500 dropped 1.09 per cent on Wednesday. It is now down nearly six per cent from the same time last year.

The US dollar also took a beating as the FOMC report pushed it down 0.4 per cent against a basket of six currencies.

The Canadian and Australian dollars, the Japanese yen and the Russian ruble all pushed against the greenback on Wednesday on the rise in oil prices.

The FOMC report was released while Asian and European stocks were closed. But they were all buoyed by the rise in both West Texas and Brent crude prices early on Wednesday on hopes that announced talks between Russia and members of the Organization of Petroleum Exporting Countries (OPEC) could lead to an agreement to curb production.

The BRICS Post with inputs from Agencies