The Fed opted to wait for further evidence of stronger inflation and less slack in the labor market before raising rates, even as the economy showed signs of improving. It also scaled back the number of increases it expects in 2017. Three officials -- the most since December 2014 -- voted against Wednesday’s decision, up from one at the last meeting. Traders are pricing in a 57 percent chance of a hike in December.
The Fed statement soothed markets after worries that central bankers are less willing to boost stimulus measures had earlier this month spurred the biggest selloff since the U.K.’s secession vote in June. The decision came after the Bank of Japan tweaked its monetary policy, giving officials scope to keep loosening while limiting the negative impact on bank earnings. The S&P 500 on Thursday capped its first three-day advance in seven weeks.
To the biggest bull on Wall Street, the Fed’s restraint is one more reason that U.S. stocks are on their way to record highs. Thomas Lee, managing partner and co-founder of Fundstrat Global Advisors, has the highest year-end target for the S&P 500 among 19 strategists surveyed by Bloomberg. His forecast level of 2,325 implies a 6.8 percent gain from today’s close.
With the Fed moving off center stage for now, investors will turn their attention to economic data, and another earnings season that gets underway in about three weeks. A report today showed filings for unemployment benefits dropped last week to match the lowest level since April.
Separate data showed sales of previously owned homes unexpectedly declined to a six-month low in August, signaling buyers are getting discouraged by a lack of properties to choose from. A Bloomberg gauge tracking the degree to which data miss or exceed economists’ estimates has been negative for all of September.
This article was provided by Bloomberg News.