Federal Reserve Holds Interest Rates Near Zero, U.S. Stocks, Bonds Rise

By Reuters
Federal Reserve
A woman walks past the Federal Reserve headquarters in Washington September 16, 2015. REUTERS/Kevin Lamarque

NEW YORK - U.S. stock and bond prices rose, while the dollar fell on Thursday after the Federal Reserve decided to hold U.S. interest rates near zero on concerns about global weakness but left the door open for a rate increase later this year.

The move was not a complete surprise, as a poll by Reuters released on Wednesday showed a majority of economists expected no rate hike. The futures market had implied traders assigned a low probability the Fed would raise rates for the first time in nearly a decade after its two-day policy meeting.

"Given the global headwinds, the last thing we need right now was a hike in rates and any kind of hawkish projections," said Brian Dolan, head market strategist at DriveWealth in Chatham, New Jersey.

The Dow Jones industrial average <.DJI> was up 46.63 points, or 0.28 percent, to 16,786.58, the S&P 500 <.SPX> was up 8.95 points, or 0.45 percent, to 2,004.26 and the Nasdaq Composite <.IXIC> was up 29.66 points, or 0.61 percent, to 4,918.90.

Two-year Treasuries notes rose 5/32 in price for a yield of 0.722 percent, down 9 basis points from late Wednesday.

"Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term," the Fed said in its policy statement after the meeting. It added the risks to the U.S. economy remained nearly balanced but that it was "monitoring developments abroad."

This Fed outlook caused a sell-off in the dollar and oil while boosting gold prices

The dollar index <.DXY>, which tracks the greenback versus a basket of six currencies, fell 0.81 percent, to 94.651.

Brent crude was last down 47 cents or down 0.94 percent, at $49.28 a barrel. U.S. crude was last down 12 cents, or down 0.25 percent, at $47.03 per barrel.

Spot gold prices rose $9.06 or 0.81 percent, to $1,128.21 an ounce.

(Additional reporting by Gertrude Chavez-Dreyfuss in New York,; Marc Jones and Marius Zaharia in London and Saikat Chatterjee in Hong Kong; Editing by Nick Zieminski and James Dalgleish)

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