US interest rates left unchanged as 'uncertainties' arise
US stocks rose and bond yields fell to a two-year low after Federal Reserve chairman Jerome Powell announced the rate freeze
Thursday 20 June 2019 06:34, UK
US interest rates have been left unchanged, but the Federal Reserve signalled it is prepared to start cutting rates if needed, to protect the US economy.
The Federal Reserve kept its benchmark rate in a range of 2.25% to 2.5%, where it has been since last December.
But the US central bank signalled that it could cut interest rates by as much as half a percentage point over the remainder of this year, as it responded to increased economic uncertainty and a drop in expected inflation.
Fed chairman Jerome Powell said that because "uncertainties" have increased, the bank would "act as appropriate to sustain the expansion," as US household income and spending continued to rise and unemployment remained at a 50-year low.
The Federal Reserve expects inflation to finish this year below its 2% target, a trend that could make it more likely for policymakers to cut short-term interest rates in the coming months.
US stock markets rose and bond yields fell soon after the interest rate announcement at 2pm eastern time.
The S&P 500 index closed up 0.3%, the Dow Jones Industrial Average finished the day up 0.16% at 26,506.59, while Nasdaq closed up 0.4% at 7,987.55 points.
US treasury yields fell to their lowest level since September 2017, down to 2.04% from 2.06% late on Tuesday.
Speaking at a press conference afterwards, Mr Powell said there had been "not much support" among policymakers to raise rates on Wednesday.
He added that the Reserve wanted to keep and eye on current global events - meaning the trade dispute between the US and China, weak manufacturing and lower investment due to falling oil prices - before it took any decision to change interest rates.
When asked about the likelihood of losing his job, after effectively defying the wishes of US President Donald Trump, who has been calling for an interest rate cut, Mr Powell insisted he would serve his full-term as head of the central bank - even if the president tried to demote him.
He said: "I think the law is clear that I have a four-year term and I intend to serve it."
The US president had previously expressed his displeasure with Mr Powell after the Fed raised rates four times in 2018, saying the increases had stifled growth and undermined the benefits of his tax cuts.
Mr Trump asked White House officials to look into the possibility of removing Powell as Fed chairman but keeping him on the board of governors, according to reports by Bloomberg News on Tuesday.
The London markets had slumped as investors remained cautious ahead of the US rates announcement.
The FTSE 100 closed down 39.5 points at 7,403.54, at the end of trading on Wednesday.
But it saw the value of the pound lift higher and simultaneously press down on London's leading markets.
Sterling was up 0.57% to 1.262 versus the US dollar and increased 0.42% to 1.126 against the euro.