US Federal Reserve holds interest rates steady

The Fed also said the inflation measured on a 12-month basis “has been running close to” the central bank’s target of 2 percent, as the unemployment rate has fallen to a level Fed officials see as consistent with full employment.

Still, Fed officials, including Vice Chair Stanley Fischer, have argued growth is likely to be stronger during the rest of 2017, economists at Goldman Sachs Economics Research pointed out.

The Federal Open Market Committee said it was maintaining the target range for the federal funds rate at 0.75 to one per cent.

“In the meantime, we see investors going with this tightening mood and favouring exposures benefitting from a hike such as floating rate notes”.

Analysts at Barclay’s Investment Bank agreed.

The Fed usually raises interest rates in strong economic times, which then has the knock-on effect of raising the demand for the US dollar and jumping up its value.

“The USD and US rates were slightly higher after the statement, with nothing to change the consensus view that the Fed is likely to hike again next month, subject to the data flow over the next six weeks”.

The All-share index inched up 0.03 percent to 53,602 points, while the Blue-Chip Top-40 index rose 0.15 percent to 46,988 at 0706 GMT. The odds of a June rate hike were 67%.

But with the trading close to its weakest levels since the days after U.S. President Donald Trump’s election in early November, currency analysts said enough bad news had been priced in, and that the risks to the greenback therefore were broadly to the upside. Both observations suggest the Fed remains on course to approve two more rate hikes this year.

“However, it may happen amid a heavy European political agenda and following negotiations around the expected United States tax cut plan”.

The Federal Reserve voted Wednesday not to raise its key interest rate, as central bank officials expressed concern with the pace of economic growth. Gross domestic product grew at a sluggish 0.7 percent annual pace in the first quarter as consumer spending nearly stalled. That was down from 3.5% the previous quarter.

A string of higher inflation readings was also broken in March, a sign the economy had cooled off.

The U.S. added just 98,000 net new jobs in March, the fewest in a year, although economists said weather was probably a factor.

Yet the economy has repeatedly picked up speed in the spring and summer, and Wednesday’s statement shows the central bankers expect the same pattern to reoccur.

Wednesday’s affirmation from the Fed that it was optimistic on economic growth and that its rate rise plans remained intact bolstered the dollar against the euro and yen and pushed Treasury yields slightly higher.