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Fed holds interest rates steady, downplays economic weakness

Fed holds interest rates steady, downplays economic weakness

The Fed recently hinted that it would like to start reducing its QE assets this year if possible.

As of the March 15 statement, Fed committee members anticipated maintaining this policy "until normalization of the level of the federal funds rate is well underway". The Fed's voting members unanimously chose to leave rates unchanged this week, the release said. However, the language in its monetary policy statement was not enough to convince traders that a June rate hike was off the table. I think that signals that the Fed is looking past some of the soft data as likely being either weather related or seasonal or consistent with the trend that we've seen over the years of a surprisingly weak first quarter and typically an improvement in the economy in subsequent quarters. That's in line from its reading of the economy in recent months but a shift from the past few years, in which officials considered it more likely the economy would fall short of its forecasts.

"We view much of the weakness in March as driven by one-off factors and expect inflation to firm on a monthly basis in the very near term", Rod Martin, an economist at Barclays in NY, told Reuters.

US consumer spending was unchanged in March for a second straight month and a key inflation measure recorded its first monthly drop since 2001, but economists still expect an interest rate increase in June as the labor market tightens.

Policymakers are awaiting clarity on the size and scope of the tax cuts, infrastructure spending and regulatory changes that the Trump administration will be able to push through Congress.




The central bank continued to describe the risks to its outlook as "roughly balanced", meaning officials consider it equally likely the economy will perform better or worse than projected.

Still, growth posted a weak performance in the first quarter, with gross domestic product expanding at just a 0.7 percent annual pace. The Fed's policy statement Wednesday characterized recent average monthly job growth as "solid".

The statement did say it expected the first-quarter's anemic pace to speed up later in the year. Business fixed investment firmed.

He said, the house is positive on the India market from a long-term perspective and expect an 18 percent earnings growth for the next fiscal. Federal Reserve rate rise expectations return as a market driver. By a unanimous decision, the FOMC voted to leave the target federal funds rate in a range of 0.75% to 1%. Together, the Fed, the European Central Bank and the BOJ are sitting on $13 trillion in assets purchased during years of so-called "quantitative easing". The Fed jolted investors when it released the minutes of its March meeting, which showed that most officials thought that process would be appropriate later this year. The result, however, was that central bank balance sheets exploded!

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