The Federal Reserve Has Kept Interest Rates In The US Unchanged: What Investors Should Know

In a previous article, I had hashed out Federal Reserve Chair Janet Yellen’s views for a rate hike and Fed Governor Lael Brainard’s take on why rates should be kept unchanged.

In the Fed’s latest meeting to decide on where interest rates will be, which ended yesterday night, it turns out that the US central bank has opted to hold its fire and keep benchmark interest rates there at between 0.25% and 0.50%.

The committee within the Fed that made the decision, the Federal Open Market Committee (FOMC), acknowledged the continued strengthening of the US’s economy and labour market. But at the end of the day, a call for caution had prevailed. This is summarized in the following quote from a Fed statement released last night:

“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”

It was not a unanimous decision by the 10-member FOMC to keep interest rates in the US unchanged. There were three dissenting voters, nomely, Esther L. George, Loretta J. Mester, and Eric Rosengren. They are the presidents of the Kansas City Fed, Cleveland Fed, and Boston Fed, respectively.

The trio had preferred to raise rates by 0.25 percentage points.

While the Fed has opted to keep interest rates unchanged this time around, it also signalled that an increase is likely by the end of the year, especially if economic conditions in the US manage to strengthen in the coming months.

As my colleague David Kuo recently stated, an increase in interest rates in the US (what happens to interest rates there has a strong influence on the interest rate environment in Singapore) would benefit financial institutions here such as United Overseas Bank Ltd (SGX: U11).

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Ong Kai Kiat does not own shares in any companies mentioned.