The Federal Reserve Board disappointed savers on Thursday when it announced that interest rates would stay at the record low 0-0.25 percent level for the time being. Instruments such as federal fund futures and overnight indexed swap are pricing at only about one in two chance of a rate hike by the end of year.

“Low United States interest rates have encouraged borrowing in dollars, and this capital has flowed into emerging markets in search of higher returns”.

Fed officials spent most of the summer suggesting that they wanted to raise rates in September, only to lose confidence as signs of slowing global growth weighed on markets. “But volatility is likely to remain high as markets, like the Fed, will still have to confirm the US economy is withstanding the adverse impact from the global economy”, said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.

Ahead of the meeting, many economists expected what they called a “hawkish hold”, in which the Fed would keep rates near zero while emphasizing that liftoff was coming.

Stocks ended mostly lower yesterday after the Federal Reserve decided not to raise interest rates, although Fed Chairman Janet Yellen said a rate hike is still likely this year.

In addition, the Fed’s preferred inflation measure is tracking just 0.3 percent annually, largely because of falling energy prices. An alternate indicator that Williams watches closely, the trimmed mean, is also below target. Low oil prices have also inhibited inflation. Trading right after the Fed’s 2 pm statement release was choppy with the major U.S. indexes first hitting session highs and briefly turning negative before reversing course and turning positive again.

Still, economic conditions and policy “from China to Europe to Brazil” have boosted the dollar and held back growth and inflation, and continued problems overseas could exacerbate the effect, Williams said.

China affects the world more than ever before, and its influence over global markets will only increase as it approaches the USA economy in size.

But they downgraded their projections somewhat for the next two years, with growth forecast to be 2.3 percent next year and 2.2 percent in 2017, continuing the sluggish pace that has marked the recovery from the Great Recession.

Clearly China’s recent devaluation of the yuan, its stock market rout and continuing decline in manufacturing activities have spooked everyone, including the US Fed. The one vote was from Jeffrey Lacker who recommended a quarter point raise.

The precious metal is generally seen as a haven investment in times of economic uncertainty, although gold has come under heavy pressure in recent months as the dollar strengthened on expectations of a USA rate hike.

At her news conference, Yellen stressed that even after the first increase from zero, interest rate policy will be “highly accommodative for quite some time”.