Fed keeps powder dry on rate rise

While the Federal Reserve has long planned to pursue a slow but steady course of normalizing interest rates, it has emphasized that the pace will hinge on the progress of the economy.

In December, the Fed raised rates by 25 basis points to a range of 0.5 per cent to 0.75 per cent with a unanimous vote. Infrastructure spending and tax reform are also on his agenda.

That could lead to four rate hikes and further discussions about whether, when and how to decrease the amount of assets held on the Fed’s balance sheet, according to Rieder. Previously, it had said only that inflation was “expected” to rise to 2 percent. Facebook also reported 1.86 billion daily active users and 1.23 daily active users – both higher numbers than anticipated. Hiring was consistently solid in 2016, and the unemployment rate ended the year at 4.7 percent, just below the 4.8 percent level the Fed has identified as representing full employment.

Central bankers have been cautious about raising rates too quickly, and likely will tread cautiously as Trump shakes up U.S. policy, threatening to cancel trade pacts and impose new tariffs, criticizing trade partners and promising economic stimulus, tax cuts and slashed regulation. “But political risks are definitely one of the biggest this year and, given the surprises we had through 2016, it’s really hard to tell what’s in store”. “It’s going to be a very tall order for the Fed to move at their next meeting. Overall, the FOMC February statement was measured and did not provide any new guidance on when the Fed will hike rates in 2017”.

The policy-setting Federal Open Market Committee (FOMC) left its benchmark lending rate unchanged on Wednesday.

It’s always possible that the central bank could surprise Fed watchers Wednesday by sending a signal that a rate hike is coming soon.

“I think the most important comment was the more dovish tone towards inflation expectations, and the point made about inflation hitting target reflects base effects from a year ago as well as an array of transitory factors”, he added.

“The sharp rebound after a pull down below $1,200 and the Asian pricing model, despite the Chinese New Year, seems favorable and we see a lot of bullish signals”, said Spencer Campbell, General Manager with Kaloti Precious Metals, Singapore.

In a January 19 speech at Stanford University in California, Yellen predicted that the American economy would continue to pick up steam, building on recent monthly unemployment rate lows and rising oil prices -often a key determinant of inflation, another factor necessary for a rate hike-allowing the Fed to move away from a policy tool generally used in response to an economic downturn. Yet measures of GDP growth and inflation remain relatively tepid. The Committee continues to closely monitor inflation indicators and global economic and financial developments.

Stocks have mostly been in an upward trend since the shock of Donald Trump’s November election victory, but that rally has shown signs of stalling of late amid uncertainty over the specifics and rollout of some of his administration’s policies.