Federal Reserve Leaves Interest Rates Unchanged

The Fed raised rates by a quarter point in March and said it expected two more increases in 2017.

The Federal Reserve, facing this week its biggest policy decision yet under Chair Janet Yellen, puts its credibility on the line regardless of whether it waits or raises interest rates for the first time in almost a decade.

A statement from the Federal Reserve said: "In view of realized and expected labor market conditions and inflation, the Committee chose to maintain the target range for the federal funds rate at 3/4 to 1 percent".

Even so, investors increased bets on a move in June after absorbing the Fed's sanguine assessment of the outlook and its encouraging observations on inflation, following data showing first-quarter economic growth of 0.7 per cent and monthly price declines in March. "Economic activity slowed" while "household spending rose only modestly".

Overall, the Fed was positive, albeit cautious, helping the dollar firm against the yen. "Base case is for a couple more rate hikes this year - probably in June and September - and for the beginning of balance sheet shrinkage in December".

The Fed is in its first tightening cycle in more than a decade after it spent years keeping rates near zero to nurse the economy back to health following the 2007-2009 recession.

Always Dreaming Wins 143rd Kentucky Derby
It was up for grabs in the final furlong with several horses still having a shot. "That's the problem with the auxiliary gate". Once he got in a comfortable position on the turn and we moved to the outside, he got into the bridle really really handsome .

The kiwi dollar had gained on Wednesday after government figures showed jobs growth of 1.2 per cent, a faster pace than the growth in population. Gross domestic product grew at a sluggish 0.7 percent annual pace in the first quarter as consumer spending nearly stalled. Economists expect 190,000 new jobs and the unemployment rate to stay at 4.5%, a very low level. Administration officials have expressed hope to get tax cuts approved before the end of the year, but no infrastructure spending program has been put forth.

Antoine Lesné, EMEA head of ETF strategy at SPDR ETFs, part of State Street Global Advisors, added: "Comments from the committee members and economic data will be key to nail the second rate hike of 2017, which is expected to happen at the next meeting in mid-June".

Spot gold rose 0.2 per cent to $1,240.51 per ounce by 0245 GMT.

With regards inflation, which the Fed monitors closely, it noted that it expects inflation will stabilize around 2% over the medium term.

Investors described the post meeting statement issued early this morning Sydney time as "bullish" and pointed to the Fed's commentary that USA consumer spending continued to be solid, business investment had firmed and inflation has been "running close" to the Fed's target.

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