Central Banks Join Forces to Increase Liquidity
September 18, 2008
The Federal Reserve has decided to leave the Fed Funds rate unchanged at 2.00%. This was largely anticipated by economists but does disappoint equity traders in the current climate. Within the accompanying statement the Fed highlighted that the risks to growth and inflation both remain a “significant concern”. Tighter credit conditions, housing contraction and slowing exports are all key factors attributed to their expectations for the growth outlook, while they classify the inflation outlook as remaining “highly uncertain.” The statement is more neutral than in recent months with the current financial sector woes weighing on opinion, arguably bringing in a mildly dovish stance. After recent data and events we expect policy to now remain on hold for the remainder of the year. Price action was limited on the U.S. dollar in response to the Fed’s decision.