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FXStreet notes that GBP caught a modest bid tone following the BoE's policy decision and economists at TD Securities look for some sterling strength, but expect this to be more acute against the euro.

“The MPC left policy on hold today, with its QE programme scheduled to end in December. The MPC noted that the case for tightening had increased since August, and that a rate hike before they conclude QE in December can't be ruled out. We now expect the MPC to hike rates in August and November 2022.”

“The risk that the BoE could hike before QE ends is notable, and one we do not dismiss easily. We think that is enough to help GBP trade on its front-foot for the time being, though the magnitude remains elusive.”

“The euro has struggled since the Fed upped its hawkishness yesterday, and questions over policy divergence cloud its near-term profile for now. And, the risk that a BoE hike could still come before QE's end anchors this more deeply. We look for EUR/GBP to re-test 0.85 in the coming weeks. Below this, 0.8450 will be crucial support.”

The Conference Board announced on Thursday its Leading Economic Index (LEI) for the U.S. rose 0.9 percent m-o-m in August to 117.1 (2016 = 100), following a revised 0.8 percent m-o-m advance in July (originally a 0.9 percent m-o-m increase).

Economists had forecast an increase of 0.7 percent m-o-m.

The U.S. LEI rose sharply in August and remains on a rapidly rising trajectory,” noted Ataman Ozyildirim, Senior Director of Economic Research at The Conference Board. “While the Delta variant - alongside rising inflation fears - could create headwinds for labor markets and the consumer spending outlook in the near term, the trend in the LEI is consistent with robust economic growth in the reminder of the year. Real GDP growth for 2021 is expected to reach nearly 6.0 percent year-over-year, before easing to a still-robust 4.0 percent for 2022.”

The report also revealed the Conference Board Coincident Economic Index (CEI) for the U.S. went up 0.2 percent m-o-m in August to 105.9, following a 0.6 percent m-o-m jump in July. Meanwhile, its Lagging Economic Index (LAG) for the U.S. edged up 0.1 percent m-o-m in August to 106.3, following a 0.5 percent m-o-m advance in the previous month.

Preliminary data released by IHS Markit on Monday revealed that U.S. private sector business activity continued to grow in early September, albeit at a slower pace than in August.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 60.5 in September, down from 61.1 in August. The latest reading pointed to the slowest expansion in factory activity since April, but marked nonetheless. Economists had expected the reading to increase to 61.5. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. Supply constraints and material shortages dampened output in September. As a result, the rate of growth in production was the slowest for 11 months and lead times lengthened substantially. Meanwhile, manufacturers expanded their workforce numbers at a steeper rate in September, and both new business and export orders expanded robustly, driven by strong demand conditions. On the price front, input costs registered another significant rise, albeit slightly slower than August’s recent high, while the rate of selling price inflation accelerated to the sharpest since data collection began in May 2007 as firms passed higher costs on to their clients.

The Markit flash services purchasing manager's index (PMI) dropped to 54.4 in September, down from 55.91 in the previous month. This was the lowest reading since December 2020. Economists had expected the reading to slip to 55.0. Contributing to the softer advance in activity was a weaker gain in new business. Total sales were also hampered by a quicker drop in new export orders, and one that was the fastest since December 2020. In addition, employment levels were broadly unchanged during September, bringing an end to a 14-month sequence of job creation. On the price front, cost pressures remained historically elevated, as higher supplier prices and raised wage bills following incentives to entice workers pushed costs up. Firms sought to pass on greater prices to their clients through a marked increase in output charges.

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 54.5 in September, down from 55.4 in July. This was the lowest reading since September 2020.

“The pace of US economic growth cooled further in September, having soared in the second quarter, reflecting a combination of peaking demand, supply chain delays and labour shortages,” noted Chris Williamson, Chief Business Economist at HIS Markit. “The slowdown was led by a cooling of demand in the service sector, linked in part to the Delta variant spread. However, while manufacturers have seen far more resilient demand, factories face growing problems in sourcing enough supplies and labour to meet orders. Supply chain delays show no signs of easing, with another near-record lengthening of delivery times in September. Hence factory output growth also weakened and order book backlogs rose at a record pace in September.”

U.S. stock-index futures rose on Thursday, but retreated from early gains, as investors weighed the Fed's modestly dovish stance on rates and tapering against an unexpected increase in the U.S. weekly jobless claims.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

Statistics Canada announced on Thursday that the Canadian retail sales decreased 0.6 percent m-o-m to CAD55.80 billion in July, following a revised 6.0 percent m-o-m jump in June (originally a 4.2 percent m-o-m surge).

Economists had forecast a 1.2 percent m-o-m decrease for July.

According to the report, sales went down in 5 of 11 subsectors in July, accounting for 38.7 percent of total retail sales, led by lower sales at food and beverage stores (-3.4 percent m-o-m) and building material and garden equipment and supplies dealers (-7.3 percent m-o-m). 

Core retail sales, which excludes gasoline stations and motor vehicle and parts dealers, fell 1.3 percent m-o-m in July.

In y-o-y terms, Canadian retail sales grew 5.3 percent in July, following an unrevised 6.2 percent jump in June.

The data from the Labor Department showed on Thursday the number of applications for unemployment unexpectedly increase last week but remained near pandemic-era lows.

According to the report, the initial claims for unemployment benefits increased by 16,000 to 351,000 for the week ended September 18. This was the highest reading in four weeks.

Economists had expected 320,000 new claims last week.

Claims for the prior week were revised upwardly to 335,000 from the initial estimate of 332,000.

Meanwhile, the four-week moving average of jobless claims dropped to 335,750 from an upwardly revised 336,500 in the previous week.

As for continuing claims, they increased to 2,845,000 from an upwardly revised 2,714,000 in the previous week. 

FXStreet notes that the S&P 500 rebound has extended as expected to “fill” the price gap from Monday at 4403/4433. Analysts at Credit Suisse still expect to see a cap here for a fresh leg lower to 4238/30, but with this level to then provide a fresh and important floor.

“Whilst our broader outlook stays positive and we continue to view current price action as a corrective phase, our bias remains for 4433/38 to cap and for further corrective weakness to be seen yet prior to a more secure low being established, especially if our view for rising bond yields is proved correct.” 

“We look for 4433/38 to ideally cap on a closing basis, with a break below near-term support at 4353/48 needed to add weight to this view for a fall back to 4306/01, then what we look to be better support at 4238/30. Our ‘ideal’ roadmap would then be for a floor here for a resumption of the core bull trend."

GBP rose against most of its major rivals in the European session on Thursday after the announcement of the outcomes of the Bank of England's (BoE) latest monetary policy meeting.

At their September gathering, the BoE's policymakers decided to keep the bank rate unchanged at 0.10 percent and maintained the asset purchase program at GBP895 billion, as widely expected. 

In its monetary policy statement, the British central bank said that its Monetary Policy Committee (MPC) revised down the UK’s  Q3 GDP forecast by around 1 percent since August’s projection in part due to the emergence of some supply constraints on output. It also noted that uncertainty around the outlook for the labour market has increased since the August meeting, as the closure of the furlough scheme looms at the end of September. The BoE said that its MPC’s members forecast the UK’s CPI inflation is to rise further in the near term perspective, to slightly above 4 percent in Q4, but added that the Committee’s central expectation continues to be that the current elevated cost pressures will prove transitory.  

Despite the overall cautious stance on the economic outlook,  the BoE stated that it saw some developments strengthening the case for tightening. “At its previous meeting, the Committee judged that, should the economy evolve broadly in line with the central projections in the August Monetary Policy Report, some modest tightening of monetary policy over the forecast period was likely to be necessary to be consistent with meeting the inflation target sustainably in the medium term. Some developments during the intervening period appear to have strengthened that case, although considerable uncertainties remain.“

Another hawkish nudge was the fact that the MPC member Dave Ramsden joined his colleague Michael Saunders in arguing for the reduction of the pace of the UK government bond purchases from GBP875 billion to GBP840 billion.

An  even more hawkish signal from the BoE was the statement that “All members in this group agreed that any future initial tightening of monetary policy should be implemented by an increase in Bank Rate, even if that tightening became appropriate before the end of the existing UK government bond asset purchase programme.“

FXStreet reports that analysts at Credit Suisse report note that USD/JPY has again held key price support at 109.12/11 for the completion of a bullish “reversal day” to reassert an upward bias.

“Above 110.04/17 is needed to see the near-term downtrend break as well as the 55-day average cleared, with resistance then seen next at 110.45, then 110.81.”  

“Above the 110.81 level remains needed to clear the way for a test on long-term resistance, starting at 111.66 and stretching up to 112.40.” 

“Support is seen at 109.53 initially, then 109.41.”

The Bank of England (BoE) announced its Monetary Policy Committee (MPC) voted 9-0 to keep the Bank Rate at 0.1 percent at its September meeting, as widely expected.

The MPC also voted unanimously to maintain the stock of sterling non-financial investment-grade corporate bond purchases at GBP20 billion and voted by a majority of 7-2 to continue with the existing programme of UK government bond purchases at GBP875 billion, thus maintaining the total target stock of asset purchases at GBP895 billion.

In its statement, the BoE notes:

• Since the August MPC meeting, pace of recovery of global activity has showed signs of slowing. Against a backdrop of robust goods demand and continuing supply constraints, global inflationary pressures have remained strong and there are some signs that cost pressures may prove more persistent;
• Some financial market indicators of inflation expectations have risen somewhat, including in UK;
• BoE has revised down expectations for the level of UK GDP in 2021 Q3 by around 1% since the August Report, leaving the expected level of Q3 GDP around 2.5% below its pre-Covid level;
• Downward revision in part reflects emergence of some supply constraints on output;
• Uncertainty around outlook for labour market has increased. Key questions include how the economy will adjust to closure of furlough scheme at the end of September; the extent, impact and duration of any change in unemployment; as well as degree and persistence of any difficulties in matching available jobs with workers;
• MPC will review these, along with other, developments as part of its forthcoming forecast round ahead of the November Monetary Policy Report;
• CPI inflation is expected to rise further in the near term, to slightly above 4% in 2021 Q4, owing largely to developments in energy and goods prices. The material rise in spot and forward wholesale gas prices since the August Report represents an upside risk to MPC’s inflation projection from April 2022;
• MPC’s central expectation continues to be that current elevated global cost pressures will prove transitory;
• Given the lag between changes in monetary policy and their effects on inflation, MPC, in judging appropriate policy stance, will as always focus on medium-term prospects for inflation, rather than factors that are likely to be transient;
• At its previous meeting, MPC judged that, should the economy evolve broadly in line with central projections in the August Monetary Policy Report, some modest tightening of monetary policy over the forecast period was likely to be necessary to be consistent with meeting inflation target sustainably in medium term. Some developments during intervening period appear to have strengthened that case, although considerable uncertainties remain;
• Committee will be monitoring closely incoming evidence regarding developments in labour market, and particularly unemployment, wider measures of slack and underlying pay pressures, extent to which businesses pass on wage and other cost increases, as well as medium-term inflation expectations;
• Committee judged that existing stance of monetary policy remained appropriate

FXStreet reports that FX Strategists at UOB Group notes that USD/CNH needs to close above the 6.4880 level to allow for extra gains to, initially, 6.5000.

24-hour view: "... USD dropped to 6.4545 before rebounding strongly. The strong rebound amid oversold conditions indicates that USD is unlikely to weaken further. For today, USD is more likely to consolidate and trade between 6.4630 and 6.4820.”

Next 1-3 weeks: “As highlighted, further USD strength is not ruled but USD has close above 6.4880 before a sustained advance can be expected (next resistance is at 6.5000). On the downside, a break of 6.4500 (no change in ‘strong support’ level from yesterday) would indicate that USD is not ready to move to 6.5000 just yet.”

FXStreet reports that economists at MUFG Bank suggest that the hawkish policy update from the Fed is set to propel the U.S. dollar.

“The US dollar and US short rates have been lifted by building expectations that the Fed will begin to raise rates as soon as next year. Those expectations have been supported by the signal from the Fed that a ‘moderation in the pace of asset purchases may soon be warranted’.”

“The dots show that two more members now expect the first rate hike next year leaving the committee split 50/50, and it raised the median forecast to 0.25%, up from 0.125% in June. The median forecast for 2023 year is now 1.00%, up from 0.625% in June which adds a further one-and-a-half 25bp hikes.”

“The hawkish policy signals should encourage a stronger US dollar especially against low yielding currencies like the euro.”

FXStreet reports that Senior Economist at UOB Group Alvin Liew assesses the latest BoJ monetary policy meeting.

“The Bank of Japan (BOJ), as widely expected, decided to keep its policy measures unchanged at its Monetary Policy Meeting in September. The main policy decision was again not unanimous. For the economic outlook, the BOJ also kept its cautious recovery outlook but downgraded its assessment for exports and factory output.”

“The September MPM and Japan’s current CPI inflation trend reinforces our view that the BOJ will not be tightening anytime soon and will maintain its massive stimulus in the next few years, possibly at least until FY2023. Markets for some time have been convinced that the BOJ has reached the end of the line on normalization and will remain in a holding pattern on policy until at least April 2023 when Governor Kuroda is scheduled to leave the BOJ.”

FXStreet reports that economists at Westpac said that GBP/USD range support at 1.36 may remain under threat.

“Concerns of further supply constraints, shop shortages, and price triggering potential corporate failures (Green Gas has already folded) and household hardships have become a political issue with Govt. stepping in to avert other supply chain issues.” 

“How the BoE addresses supporting the post-pandemic recovery, which remains at risk of further lockdowns, and containing price pressures will also have to be balanced against how Chancellor Sunak seeks fiscal responsibility at the Autumn Budget (27th Oct.).” 

“BoE reactions will be critical for GBP/USD as it threatens support within its recent 1.36-1.40 range.”

Reuters reports that S&P Global lifted both its euro area economic growth and inflation forecasts for this year.

The ratings agency said that Europe's economic recovery since lockdown restrictions were lifted in March-April had been "surprisingly strong," leading it to raise its growth forecasts to 5.1% for the current year, from 4.4% previously.

S&P Global also revised up its inflation forecast for this year to 2.2% from 1.8%.

"However, we continue to see inflation decelerating below the ECB's target next year on the back of subdued wage development and falling growth momentum," S&P said.

FXStreet reports that economists at Westpac said that Fed’s taper signal and inching forward of rate lift-off plans should underpin the US Dollar Index (DXY) near-term.

“The FOMC delivered on expectations for a tapering signal, but the main takeaway is the ongoing evolution in the Fed’s thinking on the path of rate hikes. Another two officials joined the seven already pencilling in lift-off for 2022, leaving the Fed evenly divided on the prospect of starting rate hikes next year. The median dot for 2023 rose by another 25bp too, signalling three hikes for that year.” 

“Short end rate support for the USD should continue to build through 2022, though DXY is admittedly already slightly expensive vs yield spreads.”

According to the report from IHS Markit/CIPS, the latest PMI data signalled a further loss of growth momentum in the UK private sector at the end of the third quarter. Rates of expansion in both output and new orders were each the weakest in the respective seven-month sequences of growth. The rate of job creation remained elevated, however, driven by strong hiring at service providers. Meanwhile, inflationary pressures showed little sign of abating, with input costs up sharply again and charges raised to the greatest extent on record.

The headline seasonally adjusted UK Composite Output Index was at 54.1 in September, below August's reading of 54.8 and down for the fourth month in a row from May's series record. The latest figure also signalled the softest pace of expansion since the private sector returned to growth in March. Although both monitored sectors saw rates of expansion ease, the slowdown was more pronounced in manufacturing where production rose only modestly amid severe supply-chain disruption and signs of demand softening.

Business confidence eased to an eight-month low during September, but nonetheless remained above the series average as companies expressed optimism around the 12-month outlook.

According to the report from IHS Markit, eurozone business activity grew at a markedly reduced rate in September, reflecting the peaking of demand in the second quarter, supply chain bottlenecks and concerns over the ongoing pandemic. Business expectations for the coming year were also knocked by rising worries over the impact of the Delta variant on demand and supply chains, contributing to a further moderation in the rate of job creation from July’s 21-year peak. Firms’ costs meanwhile rose at the fastest rate in 21 years as demand again outstripped supply, with price rises increasingly feeding through from manufacturing to services.

The headline Eurozone Composite PMI fell sharply in September, dropping from 59.0 in August to 56.1 to indicate a further cooling of the rate of expansion from July’s 15-year high. The latest increase in business activity was the smallest since April, albeit still well above the survey’s pre-pandemic long-run trend to signal another month of above average strong growth.

Robust but slowing growth was recorded across both manufacturing and services, with the latter outperforming modestly. Whereas the service sector merely saw growth slip to the weakest since May, manufacturers reported the smallest production gain since January.

• The SNB is maintaining its expansionary monetary policy with a view to ensuring price stability and providing ongoing support to the Swiss economy in its recovery from the impact of the coronavirus pandemic. 

• SNB remains willing to intervene in the foreign exchange market as necessary, in order to counter upward pressure on the Swiss franc.

• The Swiss franc remains highly valued.

• The new conditional inflation forecast for 2021 and 2022 is slightly higher than in June. 

• This is again primarily due to somewhat higher prices for oil products as well as for goods affected by supply bottlenecks. 

• In the longer term, the inflation forecast is virtually unchanged compared with June. 

• The new forecast stands at 0.5% for 2021, 0.7% for 2022, and 0.6% for 2023. 

• The conditional inflation forecast is based on the assumption that the SNB policy rate remains at −0.75% over the entire forecast horizon.

• In its baseline scenario for Switzerland, the SNB anticipates a continuation of the economic recovery. 

• This is also based on the assumption that the pandemic containment measures will not need to be tightened significantly again. 

• Against this backdrop, the SNB expects GDP growth of around 3% for 2021. 

• In June, the SNB had still been assuming higher growth.

• The downward revision is primarily attributable to the development of consumer-related industries such as the trade industry and hospitality, which performed less dynamically than expected.

• GDP is likely to return to its pre-crisis level in the second half of the year. 

• However, overall production capacity will remain underutilised for some time yet. 

• Owing to the pandemic, the forecast for Switzerland, as for the global economy, remains subject to heightened uncertainty.

According to the report from IHS Markit, the rate of growth of the German economy slowed in September. The survey indicated ongoing supply disruption to manufacturing production, while the service sector also lost momentum following its recent strong rebound. Rates of inflation of both input prices and output charges retreated slightly further from their recent peaks, though they still remained among the quickest on record, reflecting continued pressure from energy, material and transportation costs. Concerns regarding supply chains and inflationary pressures in turn weighed on business confidence. 

September saw the headline Flash Germany PMI Composite Output Index slip to 55.3, down from 60.0 in August and its lowest since February. Nevertheless, its average over the third quarter as a whole (59.2) was an improvement on the three months to June (57.4) and the highest overall for ten and-a-half years.

Supply bottlenecks remained a major hindrance to the goods producing sector’s performance, with the survey’s Manufacturing Output Index slumping to a 15-month low of 53.8 in September. Meanwhile, business activity in the service sector showed a  notably slower rate of growth (index at a four-month low of 56.0), following a sharp rebound from June to August as virus containment measures were eased over the summer.

During today's Asian trading, the US dollar fell against major currencies after rising the day before at the results of the meeting of the Federal Reserve System (Fed).

The ICE index, which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), fell by 0.21%

On the eve of the index jumped to the maximum value for a month after the Federal Reserve made it clear that it will soon begin to wind down the quantitative easing (QE) program and may raise the base rate earlier than expected.

The Fed may begin reducing the volume of asset purchases as early as November and finish this process by mid-2022, Federal Reserve Chairman Jerome Powell said during a press conference following the meeting.

The dot plot - a chart reflecting the individual expectations of members of the Fed's board of governors and heads of Federal Reserve Banks regarding interest rates - showed that 9 out of 18 Fed leaders expect a base rate increase in 2022. Moreover, three of them believe that the rate will be increased twice. 17 out of 18 people expect the rate to rise in 2023, and all 18 in 2024.

The pound rose by 0.2% against the dollar before today's meeting of the Bank of England. Experts mainly expect that the Bank of England will not change the main parameters of monetary policy.

According to the report from Insee, in September 2021, despite contrasting developments among sectors, the business climate has improved slightly, after decreasing for two months in a row. The indicator that synthesizes it, calculated from the responses of business leaders from the main market sectors of activity, has gained one point. At 111, it remains at a high level, well above that before the health crisis (106) and, even more so, its long-term average (100).

In the services sector, the climate has improved slightly (+1 point) and remains at a high level. Managers are a bit more optimistic about their activity and demand prospects.

In building construction as well, the business managers declare being a little more confident regarding their activity prospects, despite pressures on production capacities remaining strong.

In manufacturing, however, the business climate has weakened markedly (–4 points): the balances of opinion on recent production and to a lesser extent those on foreign order books and personal production prospects fuel this fall.

In retail trade (including trade and repair of vehicles), the business climate has worsened again (–3 points). In particular, the balance of opinion on recent activity has sharply declined. The climate indicator has even fallen below its long-term average in the sector of retail trade excluding vehicles.

Finally, in wholesale trade, the bimonthly business climate has also weakened and lost three points compared to July, mainly because of the fall in the balances of opinion concerning past sales.

Increasing or falling in September, the business climate indicator remains above its long-term average in all different main economic sectors.

FXStreet reports that analysts at Natixis said that three mechanisms can be put forward to explain the lack of depreciation of the dollar.

“International bond capital is flowing into the United States, in significant quantities and sufficient to finance the US external deficit, while it is flowing out of the eurozone on average.”

“The faster recovery in activity in the US has led to expectations of a faster exit from expansionary monetary policy in the US than in the eurozone (stabilisation of the Fed balance sheet in 2022, rather than 2023 in the eurozone).”

“The faster growth in stock market indices in the US attracts international investors more to US equities than to European equities, which is obviously positive for the dollar.”

What would it take for the US external debt to lead to a depreciation of the USD?

“US external debt could lead to a depreciation of the dollar only if: The ECB announced an exit from its highly expansionary monetary policy; The European bond market became more attractive for non-residents.”

EUR/USD

Resistance levels (open interest**, contracts)

$1.1819 (848)

$1.1785 (553)

$1.1758 (566)

Price at time of writing this review: $1.1713

Support levels (open interest**, contracts):

$1.1653 (3623)

$1.1622 (1127)

$1.1584 (7008)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date October, 8 is 70586 contracts (according to data from September, 22) with the maximum number of contracts with strike price $1,2200 (8607);

GBP/USD

$1.3860 (436)

$1.3816 (481)

$1.3775 (159)

Price at time of writing this review: $1.3641

Support levels (open interest**, contracts):

$1.3591 (956)

$1.3557 (441)

$1.3531 (954)

Comments:

- Overall open interest on the CALL options with the expiration date October, 8 is 11879 contracts, with the maximum number of contracts with strike price $1,4150 (2071);

- Overall open interest on the PUT options with the expiration date October, 8 is 15114 contracts, with the maximum number of contracts with strike price $1,3800 (1778);

- The ratio of PUT/CALL was 1.27 versus 1.26 from the previous trading day according to data from September, 22

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

FXStreet reports that BMO economists presented their expectations for the Bank of England meeting.

“No changes are expected to be made to rates (Bank Rate 0.10%) nor its Asset Purchase Facility. The tone of the meeting will match the hawkish one assumed at the last gathering in August. The September meeting will see some shuffling of the deck, with two new members joining. Huw Pill is the new Chief Economist. He has hawkish leanings (and replaced the other hawk, Andy Haldane) given that he, in 2010, wrote about the limits to QE. Offsetting his views, perhaps, is Catherine Mann, who replaced well-known dove Gertjan Vlieghe. Both are unlikely to cause waves at their inaugural meeting, but a rate hike discussion is likely to dominate the proceedings. Expect a repeat of the line that some tightening is likely necessary, but policymakers will speak up on the noise in the inflation and wage data. Markets are already pricing in rate hikes in the first half of 2022; so, a similarly hawkish tone won’t be a big surprise. We also moved up our expectation for the first move: a 15 bp hike in May 2022, to get to 0.25%. That will set up the BoE to move in 25 bp increments beginning in 2023.”

RTTNews reports that the Federal Reserve hinted that tapering of the central bank's asset purchases could begin in the near future.

The Fed said in the announcement of its latest monetary policy decision that a "moderation in the pace of asset purchases may soon be warranted" if progress towards its dual goals continues broadly as expected.

During his post-meeting press conference, Fed Chair Jerome Powell indicated the central bank could begin tapering its asset purchases as soon as its next meeting in early November.

"While no decisions were made, participants generally viewed that so long as the recovery remains on track, a gradual tapering process that concludes around the middle of next year is likely to be appropriate," Powell said.

Powell said substantial further progress has been achieved with regard to the Fed's inflation goal, while "the test for substantial further progress on employment is all but met."

The comments about tapering asset purchases came as the Fed announced its widely expected decision to keep the target range for the federal funds rate at 0 to 0.25 percent.