Fed’s meeting: key moments
As expected, the Federal Reserve has dropped the pledge to be patient about the monetary policy opening the way for a first rate hike in June 2015. However, the Fed still preserves a way for retreat saying that it will all depend on how US economy performs. The Federal Open Market Committee (FOMC) wants to see further improvement in the job market and higher inflation before it starts tightening policy.
The press conference of the Fed’s Chair Janet Yellen has brought even more uncertainty to the market. Yellen underlined that the change in the text doesn’t mean that the central bank has made up its mind about the interest rate hike timing. Among the positive developments she mentioned labor market recovery. However, all in all Yellen has emphasized increased ‘asymmetric’ risks: strong dollar affects economic growth, and real GDP growth will slow down in Q1. Inflation is affected by expensive national currency as lower energy prices. Higher risks suggest keeping rates low for a longer time period. Despite all these, Yellen doesn’t rule out a rate hike on one of the coming meetings, in particular, in June.
US dollar rose on the news about the removal of the word “patience” from the statement, but then declined as the uncertainty about the timing of the rate hike remained. US stock went up.