US Fed keeps interest rate unchanged, cites 'uncertain' economic outlook

The US Federal Reserve Bank has kept the interest rate unchanged for the fourth consecutive time after its customary two-day meeting, saying the "economic outlook is uncertain" despite the economy was "expanding at a solid pace".

The Fed has kept the rate at 5-1/4 to 5-1/2 per cent.

"The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward two per cent," the Fed said on Wednesday in a statement after the meeting of the Federal Open Market Committee, the top decision-making body.

Impact on Sensex

Geojit Financial Services Head of Research Vinod Nair said, "In response to a mixed global market trend, the retreat in the market was pronounced, with significant declines in IT and banking stocks."

Despite encouraging Indian PMI data, the market struggled to rally. This downturn was due to apprehensions about the impending rate decisions from the ECB, which is expected to maintain current rates. Anticipation of the Fed policy meeting next week, likely retaining the existing rate, triggered increased US bond yields and FII selling in the market, he said.

Investors, however, await additional details on China's comprehensive stimulus plans. The broader market is unable to hold gains due to high valuations, subpar results, and persisting geopolitical tension in the Middle East, followed by an F&O expiry weighing down the market, he said.

Going forward, global market factors like the policy rate decisions of major countries will affect the market, and markets are likely to witness stock-specific actions during the ongoing earnings season, he said.

Siddhartha Khemka, Head - Retail Research, Motilal Oswal Financial Services said going ahead market is likely to consolidate further ahead of US Fed interest rate decision on Wednesday where Fed is expected to maintain status quo and give some hint with regards to rate cut timeline. Apart from this BoE monetary policy is also due coupled with few key economic data releases which might keep markets volatile.

Further many heavyweights would be releasing their earnings this week, thus stock specific action would continue despite market consolidation. 

(With inputs from IANS)