US Federal Reserve holds rates steady, plans to raise in in December

Yesterday, the US Federal Reserve kept interest rates unchanged in its last policy decision before the U.S. election, but signaled it could hike in December as the economy gathers momentum and inflation picks up. The U.S. central bank said the economy had gained steam and job gains remained solid. Policymakers also expressed more optimism that inflation was moving toward their 2 percent target.

"The committee judges that the case for an increase in the federal funds rate has continued to strengthen but decided, for the time being, to wait for some further evidence of continued progress toward its objectives," the Fed said in a statement following a two-day meeting. That suggests the bar is low for a rate increase at the Fed's final policy meeting of the year in mid-December, which has largely been factored in by financial markets, Reuters writes.

U.S. stocks extended earlier losses and Treasury yields fell after the release of the Fed statement. The U.S. dollar .DXY briefly pared losses before falling further against a basket of currencies. In the statement, the Fed's increasing confidence that prices were moving higher was reflected in its view that "inflation has increased somewhat since earlier this year" and the removal of its previous reference to inflation remaining low in the near term.

In an interview with Vestnik Kavkaza, A professor at the department of the stock market and investments at the Higher School of Economics, Alexander Abramov, pointed out that the decision to leave the rates at 0.25-0.5% was expected. At the same time, he stressed that it will make foreign money more accessible.

The expert also agreed that the Fed may raise the key rate in December of this year. "It is very likely, because many Western media reported on this subject. In particular, they reported that the Fed signals that the rate will be raised at the end of this year. And I think it is realistic," he concluded.