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American central bank insinuates an interest rate increase in december

As expected the Federal Reserve (Fed) decided to continue its zero interest rate policy. However the grand question was if the central bank would give a hint about the chances of an interest rate increase in December. The Fed keeps all options open but clearly implies that as of December 16th a stricter monetary policy will be more likely.

 

The higher chance of an interest rate increase before the end of this year gave the dollar a boost. Thereby the euro decreased over one and a half cents to 1.092 dollar. A stronger dollar and higher rates are bad news for investing in gold. De gold price decreased 2 percent to 1.157 dollar per ounce. Investing in diamond is less subject to these fluctuations.

Most economists believe the Fed’s message and expect that the American central bank will increase the rate for the first time in nine years in December.  However the interest rate futures market is not convinced yet. According to the futures market, the chance of an interest rate increase in December has only increased to 46 percent, compared to 35 percent before that.

The American stock markets responded unsteadily. Immediately after publication of the interest rate decision they had to abandon their profits, but quickly recovered.

Stock investors are apparently convinced that the central bankers believe in a durable recovery of the American economy. The atmosphere on the bonds market was less positive. The American long-term interest rate, which had already increased before the Fed’s decision, continued on that trend.