FOMC Meetings : 14-15 June 2016
The Fed on Wednesday held interest rates steady and expects to raise rates twice in 2016. But the central bank trimmed expectations for rate hikes and now sees only three rate hikes in 2017 and 2018, down from a projection of four in both years.
The U.S. Federal Reserve kept interest rates unchanged on Wednesday and signaled it still planned to raise rates twice in 2016, though it said slower economic growth would crimp the pace of monetary policy tightening in future years.
The central bank's decision to stick with its 2016 rate path, however, appeared shakier, with six of its 17 policymakers projecting just one increase this year. Only one Fed policymaker had done so when economic forecasts were last issued in March.
A sharp slowdown in U.S. hiring in May had fueled doubts about the strength of the labor market going into the Fed's two-day policy meeting. Fed Chair Janet Yellen acknowledged the need to see clear signs of economic strength before lifting rates.
We do need to make sure that there's sufficient momentum," Yellen told a news conference.
The Fed also said the economy would grow only 2 percent this year and in 2017, 0.1 percentage point lower than previously forecast for each year.
Yellen was not clear on whether a rate increase could come at the next policy meeting in late July or whether the central bank would wait for a slew of firmer data as it headed into its September meeting.
"I'm not comfortable to say it's in the next meeting or two, but it could be," Yellen said. "It's not impossible that by July, for example, we would see data that led us to believe that we are in a perfectly fine course."
Yellen said the U.S. economy appeared to have gained momentum since April, but that the labor market had lost some steam.
She acknowledged Britain's possible exit from the European Union was one of the factors in the latest rate decision, saying the June 23 referendum would have "consequences for economic and financial conditions in global financial markets."
- Median Projection
The median projection of officials for the federal funds rate at year-end remained at 0.875 percent, implying two quarter-point increases in the committee’s four remaining meetings. The median long-run projection for the federal funds rate fell to 3 percent from 3.25 percent in March.
The dollar was on the defensive on Thursday after the U.S. Federal Reserve lowered its economic growth forecasts and scaled back its rate hike projections, cementing expectations that it will have to skip tightening next month.
The euro EUR= firmed to $1.12635 from this week's low below $1.1200. The yen JPY= hit a 20-month high of 105.41 to the dollar before stepping back to steady around 105.84.
The dollar's index against a basket of six major currencies .DXY =USD eased to 94.583 from a high of 95.043 touched on Wednesday before the Fed's policy announcement.
Foreign investors sold a record amount of U.S. Treasury bonds and notes for the month of April, according to U.S. Treasury Department data on Wednesday, as investors priced in a few more rate increases by the Federal Reserve this year.
Foreigners sold $74.6 billion in U.S. Treasury debt in the month, after purchases of $23.6 billion in March. April's outflow was the largest since the U.S. Treasury Department started recording Treasury debt transactions in January 1978.
Oil futures settled lower Wednesday, pressured by concerns over global energy demand following disappointing U.S. economic data and ahead of the U.K. referendum scheduled for next week.
A modest weekly decline in U.S. crude supplies and the Federal Reserve’s decision to stand pat on interest rates failed to offer much support for prices.
July West Texas Intermediate crude CLN6, -0.79% fell 48 cents, or 1%, to settle at $48.01 a barrel on the New York Mercantile Exchange, marking a fifth session decline in a row. The August contract for Brent LCOQ6, -0.69% lost 86 cents, or 1.7%, at $48.97 a barrel.
WTI oil futures had fallen below $48, but pared losses and saw a brief tick higher after the U.S. Energy Information Administration reported that U.S. crude supplies fell by 900,000 barrels for the week ended June 10. That contradicted the 1.2 million-barrel increase reported by the American Petroleum Institute late Tuesday, but still came in short of the 1.4 million-barrel decline expected by analysts polled by S&P Global Platts.
Reference: Reuters, Bloomberg, Market Watch
Thai
Eng