The US Federal Reserve maintained its commitment to keeping rates low for a “considerable time” after it stops buying assets in October, reassuring bond markets which had sold off over concerns the US central bank was about to turn more hawkish.
The statement which prompted dissent from two Fed officials, noted an unemployment rate that is “little changed”. This suggests Fed chairwoman Janet Yellen has prioritised support for the economic recovery over the concerns of officials who worry that interest rates may need to rise early next year.
But the Fed’s latest statement shows the building pressure for a change of guidance, with new interest rate forecasts pointing to a faster pace of rises. Instead of an interest rate of 1 – 1.25 per cent at the end of 2015, the FOMC now expects a rate of 1.25 – 1.5 per cent.