Economy

Treasuries Close Modestly Higher Following Fed Announcement

Treasuries Close Modestly Higher Following Fed Announcement

The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong.

Sluggish inflation stood in the way of quicker rate rises previous year, but headline inflation has recently returned to the Fed's target of 2 per cent, leaving policymakers better placed to forge ahead with their rate-lifting plans.

"In the end it was not a major surprise for the market that the Fed left the key rate unchanged at the meeting without a press conference but made positive comments on the outlook and further rate hikes", Commerzbank analysts said in a note.

U.S. stocks rallied modestly just after the Fed statement but pulled back soon after that.

Elsewhere, Norway's central bank gives its policy decision at 0800 BST, with any sign of hawkishness from the central bank set to push the crown EURNOK= NOK= higher.

And RDQ Economics said the wording changes looked like "a signal that the Fed is not likely to react in a hawkish manner to inflation moving above 2 percent".

"If inflation moves higher and they don't respond to it, they are essentially keeping the accommodation in the economy the same", McCormick said.

More news: 6 officers injured after large explosion in North Haven, CT

Many economists believe that the Fed will be forced to raise rates four times this year, rather than the three times it indicated last December. The committee most recently raised rates by 25 basis points in their March meeting. This bullish outlook is being driven in part by America's robust labour market, where joblessness is seen falling as low as 3.6 per cent in the coming years from its current 4.1 per cent rate.

After the Commerce Department's index of household spending - the Fed's preferred inflation gauge - was reported at 2% in March, Wednesday's statement said that inflation had "moved close" to the target.

The March inflation pick-up reflected in part the fading effect of steep cuts to mobile phone charges early past year. The jump was driven more by year-ago price drops in telecoms and pharmaceuticals than by recent price gains.

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 central bank is meeting as its board is undergoing a makeover, with a raft of new Trump appointees who appear generally supportive of the Fed's cautious approach to rates since the Great Recession ended.

The first-quarter blended revenue growth estimate is 8.1 percent.

US President Donald Trump is considering issuing an executive order restricting certain Chinese companies from selling telecommunications equipment in the United States.


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