US stocks pare gain as investors weigh rate prospects

US stocks indexes ended the session at almost the exact place they were before the central bank pledged to keep interest rates low for a “considerable time.” The S&P 500 increased 0.13% to 2,001.57. The Dow Jones Industrial Average increased 24.88 points (0.15%) to a record 17,156.85.

Fed keeps ‘considerable time’ pledge as growth ‘moderate’

The Federal Reserve (Fed) stuck to its pledge to keep interest rates near zero for a “considerable time” after it stops buying assets, even as it outlined a strategy to exit from six years of unprecedented easing. “The labor market has yet to fully recover,” Fed Chair Janet Yellen said. She added that “inflation has been running below the committee’s 2% objective,” a contrast to the panel’s July statement that it was “somewhat closer” to its goal. Policy makers tapered monthly bond buying to US$15bn in their seventh consecutive US$10bn cut, staying on course to end the program in October. Yellen declined to specify how quickly rates might rise after purchases end.

Fed officials predict fed funds rate to rise to 1.375% by end-2015

Fed officials raised their median estimate for the federal funds rate at the end of 2015 to 1.375%, compared with 1.125% in June. The rate will be at 3.75% at the end of 2017, the Fed said for the first time as it included that year in its Summary of Economic Projections. That is the same as Fed officials’ longer-run estimate. The median estimate in June for the long-run fed funds rate was also 3.75%.

US consumer prices drop for first time in a year

The cost of living in the US unexpectedlydropped in August for the first time in more than a year, giving Fed policy makers reason to maintain that interest rates should remain low for longer. The consumer-price index declined 0.2% mom in August (0.1% in July), the first decrease since April 2013, a Labor Department report showed. The median forecast of economists surveyed by Bloomberg projected US consumer prices would be unchanged.

Euro-area inflation stays at five-year low amid stimulus

The euro-area inflation rate was higher than initially estimated in August, while remaining at the weakest level in almost five years. Annual consumer-price growth was 0.4% in August from 0.3% in July, above a 0.3% estimate published by Eurostat on August 29. Core inflation, which strips out volatile items such as energy, food, tobacco and alcohol, stood at0.9% in August, compared with 0.8% the previous month, data showed.

UK jobless rate drops more than forecast to 6-year low

UK unemployment fell to the lowest in six years, indicating continued strength in the labor market that Bank of England (BOE) Governor Mark Carney says will eventually boost earnings. The jobless rate based on International Labor Organization methods dropped to 6.2% in the three months through July from 6.4% in the three months through June, a bigger decline than economists forecast of 6.3% in Bloomberg News survey.

Thailand holds rate a fourth time as state spending boosted

Thailand kept its key interest rate unchanged for a fourth straight meeting to support the economy as Prime MinisterPrayuth Chan-Ocha’s newly appointed cabinet increases spending to spur growth. The Bank of Thailand held its oneday bond repurchase rate at 2%, with monetary policy committee members voting 5-0 in favor. Economists in a Bloomberg News survey predicted the decision, which extends a pause since March.

Crude falls from 2-week high as US inventories rise

WTI crude fell from a two-week high after an Energy Information Administration (EIA) report showed US inventories rose the most in five months. Brent for November settlement fell US$0.08 to US$98.97 a barrel. Source: Bloomberg

Source: HwangDBS Research - 18 Sep 2014