Business Live: Yellen defends Fed decision

The Dow Jones industrial average gained 163 points, or 0.9%, to 18,293. The Standard & Poor's 500 index rose 23 points, or 1.1%, to 2,163.  The Nasdaq rose 58 points, or 1%, to 5295.

Quote Message: The wait continues. Still there were signs that the Committee is closer to being ready for its next rise in interest rates. For one thing Janet Yellen said the case for an immediate increase was stronger than it was, though not strong enough for her to be ready just yet. The number of dissenting members who did vote for an immediate move has increased. This time there were three. In July it was just one. All that is evidence that the Committee thinks the economy is continuing its gradual return to normal. But we also discovered that the Fed’s thinking about what “normal” is has weakened further. Their view of the economy’s long term growth prospects has edged down from 2% to 1.8%. The level they think interest rates will settle at has also dropped slightly. In other words growth and rates will fall even further below where they were before the financial crisis. “Normal” is not what it used to be.

The wait continues. Still there were signs that the Committee is closer to being ready for its next rise in interest rates. For one thing Janet Yellen said the case for an immediate increase was stronger than it was, though not strong enough for her to be ready just yet. The number of dissenting members who did vote for an immediate move has increased. This time there were three. In July it was just one. All that is evidence that the Committee thinks the economy is continuing its gradual return to normal. But we also discovered that the Fed’s thinking about what “normal” is has weakened further. Their view of the economy’s long term growth prospects has edged down from 2% to 1.8%. The level they think interest rates will settle at has also dropped slightly. In other words growth and rates will fall even further below where they were before the financial crisis. “Normal” is not what it used to be.

PACopyright: PA

The Ford factory at Bridgend in South Wales has built its 20-millionth engine, the company says.

The factory has been churning out engines for 37 years.

But its future remains uncertain as Ford is cutting investment in the production of a new engine at Bridgend from £181m to £100m, 

However the firm has said there will be no redundancies.

Responding to previous Donald Trump claims that interest rates are being kept low for political reasons...

Quote Message: I can say emphatically that partisan politics plays no role in our decisions about the appropriate stance of monetary policy. We are trying to decide what the best policy is to foster price stability and maximum employment and to manage the variety of risks that we see as affecting the outlook. We do not discuss politics at our meetings and we do not take politics into account in our decisions." from Janet Yellen Chair of Fed board of governors

I can say emphatically that partisan politics plays no role in our decisions about the appropriate stance of monetary policy. We are trying to decide what the best policy is to foster price stability and maximum employment and to manage the variety of risks that we see as affecting the outlook. We do not discuss politics at our meetings and we do not take politics into account in our decisions."

Neil Wilson, markets analyst at ETX Capital, says the fact that three Fed members voted against the majority view, raises questions over Janet Yellen's authority.

"Three dissenting voices is highly unusual for the US central bank policy team, and indicates just how close the FOMC is to raising rates," he said. 

"The fact that Mester, George and Rosengren all want to raise rates also points to some division and potentially a question mark over the authority of Janet Yellen."

Janet Yellen says the Fed's "cautious approach is all the more appropriate" given that short-term interest rates are still near zero

"Our decision does not reflect a lack of confidence in the economy'

Analysts were quick to suggest that December is favourite for the Fed to increase interest rates, following its decision to keep them on hold for the moment.

Dennis de Jong, managing director at UFX.com, said a second rate hike since 2006 is still on the agenda. "While the Fed’s next meeting a week before the election may be too soon, December is looking the most likely timing for action.”

Mike Read of trading network Pelican said the market had already largely priced in a December hike. "However, there is a growing clamour of discontent among some observers who feel Janet Yellen and co are letting the market dictate policy rather than standing by their convictions," he said.

"Near-term risks to the economic outlook appear roughly balanced,” says the FOMC statement. 

"The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives.”  

The Federal Reserve said Inflation "has continued to run below the Committee's 2% longer-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports".

However it expects inflation to rise to 2% over the medium term "as the effects of past declines in energy and import prices dissipate and the labor market strengthens further".

Following the decision to keep US interest rates on hold, the Dow, S&P500,and Nasdaq are all up by about 0.4%.

First time since December 2014 since three members voted against the majority view.

Minutes from the Federal Reserve's August meeting show policy-makers have kept US interest rates on hold.

At its meeting, the Fed opted to hold rates between 0.25% and 0.5%.

ReutersCopyright: Reuters

Reuters reports that an agreement to fight global warming is getting closer.

It reports that UN Secretary-General Ban Ki-moon said that dozens of countries have ratified the deal at the United Nations, taking the total to 60.

The deal, agreed by nearly 200 countries in Paris last December, needs ratification by at least 55 countries representing 55% of global carbon dioxide emissions to take effect.

Mr Ban said the 60 countries represented more than 47.5% of emissions.