The greenback lost ground against all but two of its major peers.
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Still, many analysts had expected the statement the Fed released today to signal that modestly higher lending costs were coming soon – in part to satisfy the growing number of Fed officials who have pushed for a resumption of rate increases.
Three members of the policymaking committee dissented from the decision. Look to see whether the central bank scales back that expectation.
Although there is still the risk of a looming rate hike, Mike Draghosits, senior commodity strategy at TD Securities, said that gold is seeing a bit of a rally following the statement because the Fed is in no hurry to raise interest rates.
AUD/USD continued higher following the Fed meeting as the reaction in the currency markets was somewhat mixed with volatile movements in the US Dollar.
The Fed said U.S. economic activity had picked up and job gains were “solid” in recent months.
The Federal Open Market Committee (FOMC) announced on Wednesday that the federal funds target range will remain at 0.25 to 0.50 percent for at least the next six weeks, ending weeks of speculation. Finally, the fact of the matter is that there simply isn’t any evidence of the kind of inflation or runaway economic growth that would make Federal Reserve action either presently or in the near future necessary suggests that the Fed shouldn’t act at the present time. Anderson called the pace “glacial rather than gradual”.
The U.S. Energy Information Administration reported a 6.2 million barrel decline in weekly crude inventories, confirming a similar reading from the American Petroleum Institute yesterday.
Even though economists see a November rate hike as nearly unthinkable given the presidential election just days later, Yellen stressed that the meeting would be a live one, meaning a rate move is possible.
Later she added: “The Federal Reserve is not politically compromised”.
As expected, the Fed moved quickly Wednesday to start preparing markets for an eventual rate increase later this year.
Ahead of the announcement, Lawrence Summers, former Director of the NEC for President Obama, fired off a series of tweets urging the Fed not to raise. The so-called dot plot also showed a wider dispersion in individual members’ expectations. There are two meetings left this year, and a rate hike seems probable.
“We’re generally pleased with how the USA economy is doing”, she said, although the Fed did cut its forecast for growth this year from 2% to 1.8%. The median forecast was at 1.875% in 2018 and 2.625% for 2019. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal. The decision was largely expected by economists and investors who bet there was very little chance of a move.
Nonfarm payrolls have climbed by 182,000 jobs on average so far this year, although the most recent report showed a cooling to 151,000 job gains along with moderating wage increases.
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The Fed in December signaled that four rate increases were likely this year, but that was scaled back in March due to a global growth slowdown, financial market volatility and concerns about tepid United States inflation.
