The dollar gradually reversed gains during the European session, which helped pull silver prices steadily higher. It added: “Near-term risks to the economy appear roughly balanced”.
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The markets had widely expected that the Fed would keep its key lending rates unchanged. “That’s good news.we don’t see the economy as overheating now”, Fed Chair Janet Yellen said Wednesday at a press conference, suggesting the Fed had the opportunity to allow the labor market to continue to improve without running a hot economy.
Most economists say the U.S. Federal Reserve will also reduce the predicted growth rate for the U.S. economy.
“Inflation has continued to run below the committee’s 2% long-run objective, partly reflecting earlier declines in energy prices and in prices of non-energy imports”. Instead, officials now foresee a move to a 0.65 percent level this year, or a quarter point from the current 0.4 percent funds level (the official policy is to target the rate between 0.25 percent and 0.5 percent).
“Most people were expecting some version of this, the idea that they weren’t actually going to hike rates but they didn’t want the notion that the Fed is never going to hike”, said Lewis Alexander, the chief US economist at Nomura.
The opposition underscored the intense policy debate inside the central bank and a heavily divided Fed over rate hikes.
“The Committee chose to maintain the target range for the federal funds rate at 1/4 to 1/2 percent”, the bank’s Federal Open Market Committee said in a statement, maintaining the rate it established in December.
However, the United States central bank said in a statement on Wednesday following its two-day policy meeting that the case for a rate increase “has strengthened”.
It is unlikely the US Fed would hike rates in November, partly because of the US presidential election.
The Fed has held its target rate for overnight lending between banks in a range of 0.25 percent to 0.50 percent since December, when it raised borrowing costs for the first time in almost a decade.
The Fed’s move followed the Bank of Japan’s announcement Wednesday that it left unchanged its negative interest rate on certain commercial-bank deposits and said it would introduce a 10-year interest-rate target. They foresee only two rate hikes next year and two in 2018, down from three each year.
In a new round of economic projections published Wednesday, 14 of 17 Fed officials said they expected to raise the benchmark rate at least once this year.
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Indeed, the Reserve made clear in updated forecasts that it expects growth to remain tepid for the next three years. And the yield on the 30-year Treasury bond TMUBMUSD30Y, +0.11% which is the most sensitive to long-term growth and inflation expectations, slipped by 0.2 basis point to 2.350%, also a two-week low.
