Although ordinarily a big news event for investors, today’s interest rate decision by the Fed has been largely overshadowed this week by a variety of other stories. Ongoing concern surrounding the pig flu outbreak and investor jitters over big bank "stress tests", not to mention the upcoming assessment of the Obama administration’s first 100 days in office, has meant the Fed’s interest rate decision at 19.15 BST this evening has taken a back seat.
CaxtonFX analysts believe the Fed will keep interest rates on hold at the current range of 0% - 0.25% because, since their last meeting in March, there has been a mini-revival in equity markets. The central bank's decision to pump $1.2 trillion into the American economy by buying government debt has gone some way to boost lending, and is one of the reasons why many American banks were able to report better-than-expected first quarter results earlier this month. As a result, we believe this month’s meeting is more likely to be used to examine the effectiveness of policies already in place, rather than to announce any further rate cuts or new initiatives.
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