Wall Street stays weak as Fed sets stage for December rate hike

Wall Street stayed weak on Wednesday after the Federal Reserve kept interest rates unchanged but signalled it could hike in December, as equities remained pressured by uncertainty over the impending US elections.

The S&P 500 headed toward its seventh straight session of declines, its longest such streak in about five years.

The US central bank said the economy had gained steam and job gains remained solid, and expressed more optimism that inflation was moving toward its 2 per cent target.It was the last Fed decision before next week’s presidential election between Democrat Hillary Clinton and Republican Donald Trump, a race that appears to be increasingly close.

The Fed said the case for a rate hike had “continued to strengthen” but that it had decided to wait for more evidence of progress toward its objectives. Most analysts and investors expect a rate hike at the Fed’s next meeting in mid-December.

“The Fed continues to inch even closer to a December rate hike as it states that its case for raising rates has strengthened,” said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

“The market may be wondering if there’s enough evidence of a stronger economy to warrant a rate hike versus a belief that chair Yellen needs to replenish her toolkit in the event of a weakening economic backdrop,” Krosby said.

As it did after its September meeting, the Fed said the near-term risks to the economy appeared “roughly balanced”. Some analysts had thought this phrase might have been revised to send a stronger signal of a possible December rate increase. The Fed said nothing explicit in Wednesday’s statement about considering a rate increase at its “next meeting” – words it had used last year in a statement it issued before it raised rates in December. A rate hike next month would mark a resumption of the increases the

Fed began in December, after having left its benchmark rate at a record low near zero for seven years. – (Reuters/Bloomberg)