US Fed Still on Rate Hike Track but Will Wait

The Federal Reserve signaled a pickup in the economy is keeping it on track to raise interest rates this year, though subsequent increases are likely to be more gradual than anticipated earlier.

“Since the committee last met in April, the pace of job gains has picked up and labor-market gains have improved further,” Fed Chair Janet Yellen said at a press conference in Washington Wednesday after the Federal Open Market Committee voted to keep the main rate at zero, where it has been since late 2008.

New forecasts issued by the committee implied two quarter-point rate rises this year but a shallower pace of increases in 2016. Yellen stressed that the date of the first rate increase is less important than the trajectory of subsequent ones. She said tightening would be “gradual,” and that the Fed wouldn’t follow a “mechanical” formula.

“They’re starting from a very low point and they’re going to take it very slowly,” said Brian Jacobsen, who helps oversee $250 billion as chief portfolio strategist at Wells Fargo Advantage Funds in Menomonee Falls, Wisconsin.

Stocks rose after the Fed announcements, with the Standard & Poor’s 500 Index up 0.2 percent to 2,100.38 as of 4:01 p.m. in New York. Ten-year Treasury note yields were little changed at 2.31 percent.

via Bloomberg

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza