Federal Reserve holds rates, on track for June interest rate hike

Federal Reserve holds rates, on track for June interest rate hike

The Federal Reserve left the base rate unchanged in the United States, but the central bank also stressed that prices are rising and expect inflation to move closer to its 2% target in the medium term.

They had raised the rate.25 percentage point at their last meeting in March - the second hike in four months - and signaled two more small hikes were coming this year.

The dollar held steady against a basket of currencies on Friday, having retreated from four-month highs on profit-taking, with the focus on whether U.S. jobs data will provide the spark for another push higher. The Dow slumped 174.07 points or 0.7 percent to 23,924.98, the Nasdaq fell 29.81 points or 0.4 percent to 7,100.90 and the S&P 500 slid 19.13 points or 0.7 percent to 2,635.67.

The FOMC's two-day meeting followed the release of data Monday that showed inflation measured by the central bank's preferred gauge had hit its 2 per cent target after being below that goal for nearly every month since April 2012.

"The real headache is that it is easy to be the Fed when inflation is below target. a very important aspect as we go into this May meeting, is the tone of the debate changes completely as we get to 2 percent and beyond", said Torsten Slok, an economist at Deutsche Bank.

In maintaining the federal funds rate in the range of 1.5-1.75%, the committee stressed its inflation target is "symmetric".

The officials said that "risks to the economic outlook appear roughly balanced". Still, there are enough factors (such as the Fed's looming June rate hike, improving US economic conditions, and rising US 10-year treasury yields) as well as uncertainty (primarily trade talks between US-China) to support the US dollar.

Attack On Journalists Is An Attack on Democracy
The BBC said one of its Afghan reporters, Ahmad Shah, was killed the same day in a separate attack in the eastern Khost province. In 2002, he became a full-time photo stringer, rising through the ranks to become the bureau's chief photographer.

- The MSCI Emerging Market Index fell 1 percent, the biggest drop in a week. The FOMC vote was unanimous, and the next such meeting is scheduled for June 12/13.

- The Bloomberg Dollar Spot Index gained 0.3 percent.

Apple beat profit and revenue expectations in the first quarter, thanks to robust iPhone sales, and it announced a $100 billion share buy-back. The index was flat on the month from February. Garmin and Clorox also reported stronger than expected results.

The Australian dollar bounced modestly as speculators took profits on long US dollar positions.

MSCI's gauge of stocks across the globe shed 0.39 percent. Singapore is not seen as being as sensitive to higher USA interest rates in comparison to its regional peers, which does provide some light behind why the Singapore Dollar is trading somewhat higher against the USD after the FOMC statement. Equities tumbled in the final hour of trading as concern mounted that the Fed may let inflation run hot as it gradually tightens.

Friday's labor market report is expected to show that job growth rebounded last month after a disappointing payroll gain of 103,000 in March.

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