On Wednesday, the federal reserve kept their rates unchanged once again. The decision reflects their ongoing concerns surrounding a stall in US employment and inflation, the possible Britain’s Brexit and its potential impacts on the global markets.
Even though US economic growth remains robust, Janet Yellen has highlighted that the UK referendum may pose unfavourable economic and financial conditions for the global markets and this could ultimately affect the domestic outlook. Thus far, the FOMC has reduced its forecast for US growth to 2% this year amidst a slowdown in US hiring, lacklustre business sentiments, and an inflation rate that refuses to pick up.
That said, the committee is of the optimistic view that they should be able to increase the Fed funds’ rate at least twice over the next six months to around 1% once the hiring and inflation momentum gears up. There is little market reaction over last night’s decision and SIBOR remains unchanged.