Fed keeps US interest rates stable ahead of next month's anticipated hike

Federal Reserve Lowers Key Rate By Three Quarters Of A Point
The US Federal Reserve is expected to raise interest rates in December, the fourth time this year (Source: Getty)

US stocks ticked upwards as the Federal Reserve said it would keep its interest rate benchmark stable for at least another month.

The S&P 500, which had been trading down 0.30 per cent ahead of the announcement, clawed back some of its losses, closing down 0.25 per cent to 2,807.

The Fed said it would keep interest rate guidance at between 2-2.25 per cent.

The US economy remains strong, the Fed said, with job gains and increases in household spending.

Inflation has remained at around two per cent, while long-term expectations are unchanged, the central bank announced.

Interest rates are widely expected to rise for the fourth time this year in December as data shows the economy grew 3.5 per cent in the third quarter of the year.

“In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realised and expected economic conditions [...] This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments," The Fed said in a statement.

The S&P 500 had edged downwards earlier in the day as the markets anticipated the widely expected decision.

Following the statement, the dollar weakened slightly against the euro and Japanese yen.

Boris Schlossberg a managing director at BK Asset Management in New York, told Reuters: “The only surprise here is that they weren't more hawkish. There were a couple words that were more muted – that business investment had 'moderated' from its earlier pace.

“But apart from that they have not signalled any warning signs at all.”