US Fed Voting Pattern Points To Growing Consensus On December Rate Hike: Report

(MENAFN- IANS) New Delhi, Oct 29 (IANS) The US Federal Reserve's decision to keep interest rates unchanged at 3.75-4 per cent, along with two dissenting votes in favour of a rate increase, suggests growing support within the central bank for a rate hike in December, a report said on Thursday.

The Fed's policy statement acknowledged strong economic growth and persistent inflationary pressures but indicated policymakers wanted additional data before taking further action, the report from Axis Bank said.

"Strong growth prints and September PCE inflation are now the immediate tests, with labour market uncertainty potentially providing some room to wait despite broadening price pressures," the report added.

The September rate increase had provided the Fed with some breathing room, although elevated energy prices continue to pose risks to the inflation outlook.

The latest rate hold decision comes as the central bank assesses whether inflationary pressures due to elevated energy costs, tariffs, resilient consumer spending along with an artificial intelligence-driven investment boom warrants further monetary tightening.

The US 10-year Treasury yield consequently moved to around 5.02 per cent, indicating that the policy pause has not materially loosened global financial conditions.

Labour market signals are still mixed and may provide some cover, if the Fed continues to hold out against market bets for aggressive hiking through next year.

“The current monetary policy framework remains focused on monitoring inflationary pressures- specifically the breadth and sources of inflation,” the report added.

Market participants said that yields have to stabilise below recent levels for dollar assets to stop competing with emerging markets for capital and enable durable of foreign inflows into India.

The Fed also upgraded its assessment of the US economy, describing economic activity as expanding at a "strong" pace, compared with the "solid" expansion mentioned in its September meeting.

-IANS

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