US Federal Reserve 'patient' as it keeps rates on hold till the summer at least

 

Click to follow
The Independent Online

The Federal Reserve has signalled that it will not raise US interest rates before June as it held the cost of borrowing near zero.

Against a backdrop of a strong US dollar, disappointing economic data earlier this week and concerns over economic growth and demand in China and Europe, members of the US central bank’s rate setting committee emerged from two days of meetings on Wednesday to reiterate their current watchword - patience.

The Fed’s chair Janet Yellen issued a statement after the meeting closed which was upbeat on current prospects for the US economy but expressed a broad set of concerns.

The statement repeated December’s pledge to be “patient” about raising interest rates, which at the time Ms Yellen said meant the Fed was unlikely to act at the next two policy meetings. Using the phrase again in effect rules out a rate rise in March or April, when the Fed next holds policy meetings.

Barring more disappointing economic data, some economists still expect the Fed to raise rates later this year. Consumer confidence data has been upbeat and jobs growth has put the US economy in a much stronger position than most of its competitors.

The Fed is expected to raise rates from the current level of 0 to 0.25 per cent in order to dampen pressure that may come about from increased consumer spending and lower oil prices. The Fed also said that it is concerned that inflation is too low, currently running at less than its target rate of 2 per cent.

One leading economist, Ellen Zentner of Margan Stanley, told clients that she now expects the Fed to leave rates unchanged for all of 2015 with no increase until past the first quarter of 2016. Markets reacted positively to the Fed announcement, with the Dow, S&P 500 and Nasdaq all higher immediately following the statement.

Comments