LIVE MARKETS-Fed leaves rates unchanged, markets shrug 

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FED LEAVES RATES UNCHANGED, MARKETS SHRUG

The Federal Reserve held interest rates steady on Wednesday, as expected, opting to delay any changes to borrowing costs until after next week's US midterm elections and awaiting further data on the path of inflation.

In a 10-2 decision, the US central bank said it would maintain its benchmark interest rate within the current 3.75%-4.00% range while acknowledging that inflation "remains elevated," upgrading its assessment of the economy, and hinting that further rate hikes may be coming depending on the performance of inflation.

The S&P 500 .SPX is now up about 0.1% vs a gain of roughly 0.2% just before the statement hit.

The US 10-Year Treasury yield is now around 5.04%. It was around 5.02% just before 2 p.m. ET. The yield ended Tuesday at 4.993%.

According to the CME FedWatch tool the probability of a 25 basis point Fed rate hike in December is now around 86% vs. 81% just before the statement came out. The chance the Fed makes no move on rates through year end is around 14%.

Interest rate probabilities based on Fed funds futures are now pricing in around 21.3 basis points of hikes year end vs. 22.9 basis points just before the statement hit the wires.

Regarding the FOMC decision, Charlie Wise, head of global research and consulting at TransUnion in Chicago, said:

“Today’s Federal Reserve decision to leave interest rates unchanged reflects the continued balancing act between inflation concerns and an economy and employment situation that have remained relatively resilient. Despite recent inflation readings coming in higher than expected, and well above the Fed's target levels, policymakers opted to hold rates steady as they assess the impact of the September rate increase and monitor stable labor market conditions."

Wise added, "For consumers, a pause in rate hikes means credit card borrowing costs are not increasing for now, but interest rate risk has not disappeared. With future policy decisions still dependent on economic conditions, and early signals that a December rate hike may well be on the way, consumers should continue to approach credit card debt carefully. As holiday spending ramps up, it's important to stay within a budget and avoid charging more than you can repay over one to two months. Carrying larger balances can become costly, particularly if inflation remains persistent and interest rates stay elevated for longer."

Here is a snapshot of where markets stood at about 2:15 p.m. ET.

Markets now await Fed Chairman Kevin Warsh's press conference at 2:30 p.m. ET.

(Terence Gabriel, Saeed Azhar)

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