Markets

Fed holds rates steady as inflation picks up

Fed holds rates steady as inflation picks up

As speculation about interest rate rises and policy "normalisation" in the euro zone, Japan, Britain and China falls away rapidly, the U.S. Federal Reserve's now lonely monetary tightening has suddenly supercharged the dollar.

"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee chose to maintain the target range for the federal funds rate to 1-1/2 to 1-3/4%", the Fed's statement read. As rates rise, Americans feel it because their credit card rates also climb, as do the rate for mortgages, auto loans and small business loans.

And the uptick has jarred financial markets, which fear the Fed will have to raise rates at a faster pace, possibly three more times this year, rather than the two increases previously expected.

The Fed left its benchmark overnight lending rate in a target range of between 1.50 per cent and 1.75 per cent as expected on Wednesday.

"The gold market is seeing this as a little dovish, primarily because some continued to expect the Fed to hike four times this year and the messaging was a little bit soft", said TD Securities' Daniel Ghali.

Consumer prices rose 2% in March from a year earlier, according to the Fed, after a year in which inflation softened. The Institute for Supply Management (ISM) survey published on Tuesday showed USA factory activity slowed in April, but it highlighted shortages of skilled workers and rising costs, suggesting inflationary pressure is building. Experts believe they may be two or three additional hikes in 2018. That was down from 2.9 percent in the fourth quarter even though the tax cuts kicked in on January 1.

A sustained turn in inflation above this 2% target, or even a sustained period of inflation hitting this target, could change the Fed's policy outlook in the coming years. It highlighted firm corporate investment figures, while acknowledging that household spending growth had slowed recently. The Labor Department will release Friday its April employment report.

Sacked US Television Anchor Charlie Rose, CBS News Sued For Sexual Harassment
Three women who worked with Charlie Rose have filed a sexual harassment lawsuit against CBS News and the television journalist. In the following three decades, three CBS managers had been made aware of the complaints, according to the Post investigation.

The Fed has a goal of 2% price inflation. The Fed has projected inflation to be around 1.9 percent by the end of 2018.

And so in making this change, Fed officials are acknowledging that inflation is getting closer to its target.

The blue-chip index Dow Jones Industrial Average fell by 174.21 points or 0.72%, with largest sales happened in the last hour of trading.

"Every detail Mr Netanyahu presented yesterday was every reason the world came together to apply years of sanctions and negotiate the Iran agreement", the former secretary of state John Kerry said in a message on Twitter, arguing the Obama-era agreement stopped a threat that was "real".

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.

Tariffs, by increasing the prices of imports, can also fuel more inflation.


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