However, the central bank maintained its bias towards a rate hike sometime this year, while lowering its long-term outlook for the economy.
Gold also competes more easily with interest-yielding assets, like Treasurys, when rates are pinned near zero.
However, her multiple references to China and the Fed’s inaction speak louder than any efforts she makes to soothe markets.
Saying that inflation isn’t growing as desired and that the global markets are too unstable, the Federal Open Market Committee (FOMC) on Thursday announced that it would not be raising short-term interest rates any time soon. “Heightened concerns about growth in China and other emerging market economies have led to notable volatility in financial markets”.
In its accompanying policy statement, the Fed said it was anxious that “recent global economic and financial developments may restrain economic activity somewhat”.
The Fed’s key rate has been near zero since the depths of the recession in late 2008.
But trade-reliant Asian economies are likely to remain under pressure as China’s economy slows. Fed funds futures signal the rate moving to 0.23 percent by year-end. The Dow Jones industrial average ended down 65 points, or 0.4 percent. But Hatzius notes that if the Fed schedules an impromptu press conference, everyone would conclude that it is raising rates.
Instead, the Fed retained language it has been using that it will be appropriate to raise interest rates when it sees “some further improvement in the labor market” and is “reasonably confident” that inflation will move back to the Fed’s optimal inflation target of 2 percent.
Both the World Bank and the worldwide Monetary Fund have urged the Fed to be cautious as it begins tightening the reins on credit.
The median projection of the 17 policymakers showed the Fed expects the economy to grow 2.1 percent this year, slightly faster than previously thought.
Another possible explanation for the stock selloff today: investors were split on what the Fed was going to do. The Fed has a mandate to stabilize price levels, which it has defined as 2 percent annual inflation.
Crude oil prices fell sharply as speculators took profits ahead of the week-end and after a strong, almost 6% gain on Wednesday, following an unexpected drawdown in inventories.
The Treasury market rallied, with prices rising and yields dropping across all maturities; yields ended the week with their largest two-day drop since October previous year , with the 10-year yield pressured by 9 bps to a two-week low of 2.13%.