Federal Reserve Leaves Interest Rates Unchanged

US Federal

Inflation Shows Biggest Drop Since Jan. 2015

The median forecast of Fed officials is for two additional quarter-point rate hikes this year.

"The ECB (European Central Bank) may be talking about policy normalization, but at the end of the day they're still easing; they're still expanding the balance sheet", said Barclays currency strategist Hamish Pepper, in London.

However, there is still uncertainty as to whether the economy is really on track for the Fed to raise interest rates twice more this year and to begin reducing its balance sheet, either in late 2017 or next year, Okagawa added.

Analysts hadn't expected a rate hike Wednesday after 0.25 percentage point hikes in March and December. WTI crude prices headed lower after jumping above $48 a barrel on Tuesday following the API report that showed USA inventories fell by a more-than-expected 4.16 million barrels at the end of last week.

XAutoplay: On | Off If the Federal Reserve's policy statement at 2 p.m. ET today makes any news, it won't be because of a surprise interest rate hike, but markets still won't love it.

Economic data show the US economy got off to slow start in 2017 as Americans dialed back spending and companies reduced production to get inventories back in line.

Meanwhile, the dollar could get support as President Donald Trump's pushes forward on his policy proposals.

United States central bankers were unusually explicit in their statement, indicating that a disappointing first quarter, in which the economy grew at an annualised rate of 0.7 per cent, would not knock the committee off its plan to raise rates two more times this year after a hike in March.

Why Janet Yellen won't worry: Shehriyar Antia, a former Fed economist and Chief Market Strategist at Macro Insights Group, emails Axios to argue that GDP growth will recover in the second quarter. That was down from 3.5% the previous quarter. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and Global developments.

Attention now turns to US non-farm payrolls for March, due on Friday, after separate data showed private employers added 177,000 jobs in April.

The statement also did indicate that business investment has "firmed".

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. It had actually been up 2.4 percent over the past year, which is slightly better than the 2.2 percent year-over-year gains we had in February.

This article originally was published at 11:30 a.m.

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