Wednesday, 24 October, 2018

Fed: Interest Rates to Remain Steady for Now

All eyes will turn to the Eccles Building on Wednesday afternoon All eyes will turn to the Eccles Building on Wednesday afternoon
Scott Davis | 04 May, 2018, 14:21

The Fed signalled it is more confident that US inflation will remain around the central bank's 2% target range after undershooting that level for much of the last six years.The US central bank said in the statement that price growth has moved close to its target and is likely to stay there in the medium term.

"Committee made a decision to maintain the target range for the federal funds rate at 1.5 to 1.75 percent", said the Fed in a statement after concluding a two-day policy meeting. But some traders had expected the Fed to clearly signalwhether it will pull the trigger on two or three more rate hikes this year.

In the bond market, Treasuries were higher, but little-changed, with the 2-year yield right at 2.5% and the 10-year sitting at 2.96%.

Back in the United Kingdom, activity in Britain's services sector rose, but failed to rebound by quite as much as analysts expected in April following severe weather in March.

Ahead of last night's Federal Reserve meeting, the ADP employment change number, which represents job creation in the USA private sector, boded well for tomorrow's more meaningful nonfarm payroll report.

THE euro rose off four-month lows on Thursday, shrugging off data showing an unexpected slowdown in euro zone inflation, while elsewhere most currencies recovered some ground versus the dollar as the greenback's recent rally paused.

The euro area economy expanded at a slower pace in the first quarter, preliminary flash estimate from Eurostat showed Wednesday.

Last week, government economists estimated that U.S. gross domestic product grew in the first quarter of 2018 at an annual rate of 2.3%. The rate came in line with expectations.




Within the telecom sector, T-Mobile (TMUS) posted a steep loss despite the wireless carrier reporting better than expected first quarter results.

The dollar index hit a new high for the year ahead of the Fed statement, and traded lower afterward but reversed course again. The flash reading was 56.0. It raised rates once in 2016, but lifted borrowing costs three times a year ago amid a strengthening economy and labor market.

Late past year, officials began to revise up their growth projections due to the tax cut legislation, but they held back from revising their interest-rate projections because of low inflation readings. The unemployment rate in March held at 4.1%.

The continued strength of the U.S. labour market could propel the "Buck" back to recent highs.

"The market is also probably pretty long (dollar/yen) now", Horchani said, adding that the dollar could face some downside risk against the yen, if USA equities come under pressure on Thursday.

The FOMC release characterized inflation its 2% target as symmetric, meaning it would be equally as problematic if inflation lingers too far above or below that level.

The April employment data will be published on Friday, for which a figure close to 188,000 occupied is expected. The seasonally adjusted consumer confidence index dropped to an eight-month low of 43.6 in April from 44.3 in March.

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