The rise in the stock markets was supported by Yellen’s statement (and the consequent reaction of US markets) and also the appreciation of the ruble against the dollar.
The FED introduced the concept of “patience” in its statement by stating “that could be patient regarding the beginning of the standardization process of its monetary policy.” However, the big surprise was that the Central Bank has derived the expression “for a considerable period of time” when referring to keeping interest rates at historically low levels. Additionally, when questioned by financial journalists, Janet Yellen said that the FED would not, raise interest rates at least the next two meetings. Considering that the first two meetings held in January and March, the Fed will not raise rates before April 2015.
Another positive factor that emerged from the meeting was that the Central Bank estimated that at the end of 2015, the reference rates are between 1% and 1.25%. Previously, estimates ranged between 25.1% and 1:50%. Thus, it is concluded that the FED provides that the pace of increases in interest rates will be lower than previously expected. With regard to economic projections, the Central Bank predicts that unemployment stands at 5.25% in the end of 2015 (5.50% was the previous projection) and inflation in 1:30% (compared with 1.70% previously).
In short, the outcome of yesterday’s meeting took more positive contours than investors expected. On the one hand, the timing and the pace of rising interest rates will be benevolent to the financial markets and on the other hand the statement significantly reduced the uncertainty hanging over the future of US monetary policy. These factors combined with the state sold on American indices justified the strong positive reaction of the shares on Wall Street. Considering these factors and the very positive statistical seasonality of American markets during this period of the year, it is not excluded a recovery over the next days. Indeed, the past 28 years, the period that includes the last five sessions of the year and the first two of the new year, the S & P had a positive performance 25 times with an average gain of 1.74%.