US Federal Reserve keeps interest rates unchanged

ArrayWashington, March 17 (IANS) The US Federal Reserve kept its benchmark short-term interest rates unchanged as widely expected, noting that “global economic and financial developments continue to pose risks” to the US economy.

In a statement released on Wednesday after a two-day policy meeting, the Fed said US “economic activity has been expanding at a moderate pace despite global economic and financial developments in recent months,” but these developments continue to pose risks, Xinhua news agency reported.

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The Fed raised its target range for the federal funds rate by 25 basis points to 0.25-0.5 percent in December, the first rate hike in nearly a decade, marking the end of an era of extraordinary easing monetary policy.

But the turmoil in financial markets and a slowdown in global economy since the start of the year has raised increased concerns about the strength of the US economy, forcing Fed policymakers to hold off on any further rate hikes since then.

In its January policy statement, the Fed declined to make a judgement about the balance of risks to the US economy, an indication of the uncertainty about the impact of global economic and financial turbulence on the world’s largest economy.

The changes in the statement on risks signalled that Fed officials are inclined to wait for more time to assess the US economic outlook before raising interest rate again.

“We should not take the strength in the US labor market and consumption for granted,” Fed governor Lael Brainard said in a speech earlier this month. “From a risk-management perspective, this argues for patience as the outlook becomes clearer.”

About 76 percent of the business and academic economists said the Fed would wait until June to raise interest rates, while some 6 percent of economists predicted the central bank would increase interest rates in April, the latest survey conducted by the Wall Street Journal indicated.

The Fed’s updated projections released Wednesday showed that policymakers expected the federal funds rate to rise to around 0.9 percent at the end of 2016, implying two quarter-percentage-point rate increases this year, down from four estimated in December.

US stocks rally after Fed rate decision

ArrayNew York, March 17 (IANS) US stocks ended higher after the US Federal Reserve kept its benchmark short- term interest rates unchanged as widely expected.

The Dow Jones Industrial Average rose 74.23 points, or 0.43 percent, to 17,325.76 on Wednesday, Xinhua news agency reported.

The S&P 500 added 11.29 points, or 0.56 percent, to 2,027.22. The Nasdaq Composite Index increased 35.30 points, or 0.75 percent, to 4,763.97.

After the conclusion of its two-day policy meeting, the US central bank on Wednesday decided to keep its benchmark interest rates unchanged, noting that “global economic and financial developments continue to pose risks” to the US economy.

In a statement released on Wednesday, the Fed said US “economic activity has been expanding at a moderate pace despite global economic and financial developments in recent months,” but these developments continue to pose risks.

The Fed also cut its GDP growth outlook for 2016 from 2.4 percent to 2.2 percent and reduced 2017’s call from 2.2 percent to 2.1 percent, according to the latest Summary of Economic Projections.

“The Fed shifted from a dot plot suggesting 4 rate hikes this year to one suggesting 2. It will take a while for markets to settle on what the new dots mean. On one hand, a less aggressive Fed means higher inflation. On the other hand, the Fed is telling us they are no longer as concerned about inflation as in December,” said Chris Low, chief economist at FTN Financial.

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