Traders work on the floor of the New York Stock Exchange Sept. 16, 2014.Reuters
North American markets fluctuated after news that the U.S. Federal Reserve maintained the "considerable time" phrase in its policy statement today, implying that it is in no hurry to hike interest rates.
The Fed made no change in its key interest rate, and also as expected, announced a further $10-billion curtailment in its monthly bond purchases. That should bring an end to the quantitative easing program next month.
The Dow turned lower immediately after the announcement and erased earlier modest gains. But it has since swung higher, now up 39 points, or 0.2 per cent, at 17,171. The TSX is still seeing red, down by 26 points or 0.1 per cent, at 15,484, weighed down by a nearly 1 per cent drop in crude oil prices.
The 10-year treasury yield rose above 2.6 per cent after the Fed statement and the U.S. dollar rose to a new six-year high versus the Japanese yen, as Fed officials predicted higher interest rates by next year.
"This doesn't change the path for expected Fed rate increases," said Chad Morganlander, a money manager at St. Louis- based Stifel, Nicolaus & Co., which oversees about $160 billion. "The message was right down the middle. The market is taking that in stride and sighing in relief that they're not going to move in a hawkish manner. You'll continue to get additional dollar strength from the forward-looking guidance going into 2017."
"There are no major changes, and the market should be reasonably satisfied with that," said Wayne Kaufman, chief market analyst at Phoenix Financial Services in New York. "I don't think (Fed Chair Janet) Yellen wants to become more hawkish given that we've seen some softening in the labor market."
The policy-setting Federal Open Market Committee also repeated its assessment that a "significant" amount of slack remains in the U.S. labor market, a further sign it is no rush to raise benchmark borrowing costs. Fed officials also raised their median estimate for the federal funds rate at the end of 2015 to 1.375 percent, compared with 1.125 percent in June. The rate will be at 3.75 percent at the end of 2017, the Fed said today for the first time as it included that year in its Summary of Economic Projections.
With files from Bloomberg and Reuters
Darcy Keith