Fed loses patience and heads for first rate hike in nine years
THE FEDERAL Reserve yesterday edged towards a much-anticipated first rate hike since 2006 by remov ing “patient” from its language.
However, markets bet on a September, rather than a June, hike after it downgraded the expected pace of growth and inflation.
Stock markets rallied after the Fed statement, while the US 10-year Treasury yield dipped below two per cent for the first time since 2 March and the euro rose against the dollar on the more dovish forecasts that appeared to argue against a June move.
In its statement following a twoday meeting, the Fed’s policy-setting committee said it “anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its two per cent objective over the medium-term”.
“This was largely what was expected, though some may have been fearing a more hawkish Fed, and that explains the rally we’re seeing right now, that it didn’t state a precise time for raising rates,” said John Carey, portfolio manager at Pioneer Investment Management in Boston.