Fed left interest rates unchanged

Wednesday, Jun 15 2016

Fewer Federal Reserve officials expect the central bank to raise interest rates more than once this year, as policy makers painted a mixed picture of a U.S. economy where growth is picking up while job gains slow. Britain’s June 23 referendum on membership of the European Union was also “one of the uncertainties that we discussed and that factored into today’s decision,” Chair Janet Yellen said after the Federal Open Market Committee voted unanimously to leave rates steady at the end of a two-day meeting on Wednesday in Washington.

While the median forecast of 17 policy makers remained at two quarter-point hikes this year, the number of officials who see just one move rose to six from a single official in the previous forecasting round in March, according to Fed projections. The committee left their target range for the benchmark federal funds rate unchanged at 0.25 percent to 0.5 percent.

“The pace of improvement in the labor market has slowed while growth in economic activity appears to have picked up,” the FOMC said in a statement after its gathering. The Fed expressed confidence that jobs will rebound, saying that it expects “labor market indicators will strengthen.” The “drag from net exports appears to have lessened” and housing has improved, while business fixed investment has been “soft.”

The central bank also reiterated that interest rates are likely to rise at a “gradual” pace, without referring in the statement to the next meeting in July or any other specific timing for another increase. Yellen also declined to provide any guidance on timing during her press conference. “I’m not comfortable to say it’s in the next meeting of two, but it could,” she said. “It’s not impossible, I think by July, for example, we would see data that led us to believe that we’re in a perfectly fine course.”

Euro is currently being traded few points above 1.1260 level, Sterling is around 1.42 handle, while Aussie is at 0.74 area.

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