The S&P 500 closed at its highest in 2016, leading global stock gains, while the us dollar weakened after the Federal Reserve held interest rates steady while lowering expectations for the number of rate hikes this year.
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Chris Rupkey, chief financial economist at Union Bank in NY, said it was “pretty incredible that Fed policymakers are widely expected to do nothing at Wednesday’s meeting” given more signs of rising inflation.
At that time FOMC officials projected a likely four quarter-point interest rate increases this year.
The Fed noted that the US economy continues to face external risks, but indicated that moderate growth would allow it to resume tightening monetary policy this year.
The potential hike was postponed due to concerns of a slowdown in China and collapsing oil prices, reducing overall growth and inflation.
“We should not take the strength in the United States labor market and consumption for granted”, Fed governor Lael Brainard said in a speech earlier this month.
The Fed had adopted a cautious approach at its last policy meeting, in January, amid a sell-off on financial markets, weaker oil prices and falling inflation expectations.
“Such caution is appropriate, given that short-term interest rates are still near zero, which means that monetary policy has greater scope to respond to upside than to downside changes in the outlook”, Yellen said.
In late NY trading, the euro rose to 1.1183 dollars from 1.1105 dollars of the previous session, and the British pound climbed to 1.4230 dollars from 1.4143 dollars. Brent crude, the benchmark for worldwide oils, rose 31 cents at $40.64 a barrel.
In holding the official overnight rate steady at between 0.25 and 0.5 per cent, the world’s most powerful central bank signalled it was treading carefully as it confronts risks from an uncertain global economy.
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The Federal Reserve has again pared its plans for raising interest rates, citing the weakness of the global economy as a reason for greater caution about the prospects for domestic growth. The Bank of England was the next central bank to release its policy statement where it unanimously made a decision to keep rates on hold at 0.50% and left asset purchase facility at 375 billion.
