Fed Seen Holding Tight After BoJ Opts To Stoke Inflation

WASHINGTON, (UrduPoint / Pakistan Point News -21st Sept,2016) - US central bankers are expected to keep interest rates on hold Wednesday amid an uncertain US economy and after the Bank of Japan unveiled a new effort to fight weak inflation.

The Federal Open Market Committee, the Federal Reserve's policy board, has been publicly divided over whether to tighten policy, with hawks favoring higher rates before an anticipated surge in inflation, and doves arguing that global weakness means there is no immediate inflationary threat.

But with the most recent economic data indicating that US growth remains sluggish in the third quarter, and inflation low, analysts say, Fed Chair Janet Yellen will likely keep the FOMC's hand on hold when it announces its decision at 1800 GMT.

Markets are giving just a 15 percent chance that the Fed, which at the beginning of 2016 had projected two to three rate rises this year, will move Wednesday. US stocks opened up 0.4 percent Wednesday helped by the Bank of Japan's stance and the expected Fed hold.

"Our presumption is that officials will not want to tighten if markets are pricing in less than a 50 percent chance of action," said Jim O'Sullivan of High Frequency Economics. "Otherwise, they risk being pilloried for their communication skill as well as their Judgment if markets enter a period of turmoil."