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Fed's Kept Rates Unchanged And Will Closely Monitor Global Markets, Asian Stocks Retreat

By January 28, 2016 at 4:51 am
Fed's Kept Rates Unchanged And Will Closely Monitor Global Markets, Asian Stocks Retreat (Photo : Win McNamee | Getty Images News)

The U.S. Federal Reserve has kept their interest rates unchanged and said that they are keeping a close watch on global economic and financial developments, according to a report from Reuters.

Asian stocks dropped, following U.S. equities lower after the Fed's announcement.

The Fed's decision was widely expected after a month-long plunge in U.S. and world equities raised concerns.

There are concerns that the abrupt global slowdown could drag the growth of the U.S.

The Fed policymakers said that even with a "gradual" rate increase, the U.S. economy is still on track for moderate growth and a stronger labor market.

This signals that the Fed's concerns about the global markets had lessened, but not enough to squash chances of a rate hike in March.

"The committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation," the Fed said in a statement.

Wall Street fell following the Fed's statements as the S&P 500 index closed down more than 1 percent while prices for U.S. Treasuries were mixed and the dollar extended losses against a basket of currencies.

Bloomberg reports that Asian stocks followed the U.S. stock market down after the Fed warned of turbulence in the financial market may pose risks to the outlook of the U.S. economy.

The MSCI Asia Pacific Index dropped by 0.5 percent to 118.94 as of Thursday 9 a.m. in Tokyo with 9 out of the 10 industry groups retreating.

The regional gauge is also heading for a 9.9 percent drop this month due to concerns about the slowdown in China and a rout in oil and other commodities.

Japan's Topix index lost 0.8 percent while South Korea's Kospi index and Australia's S&P/ASX 200 Index both dropped 0.7 percent.

New Zealand's benchmark gauge also decreased 0.1 percent.

Shane Oliver, head of the investment strategy in Sydney at AMP Capital Investors Ltd., said that the market "latched on the Fed's negative growth comments."

"The Fed is acknowledging reality -- that the outlook has become more uncertain -- and is signaling that there may be fewer rate hikes," Oliver said.

He also said that central bankers across the globe "are starting to respond, which ultimately should be positive for share markets."

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