Fed holds steady, eyes two rate hikes this year
The Fed just announced that they intend to keep the target fed funds rate in the same 0.25-0.5% range they have been targeting since December 2015. They also gave us some idea about what they think is coming in the future.
Summarize of Fed Meeting: 15-16 Mar 2016
* The Fed Reserve held its benchmark lending rate between 0.25% and 0.50%.
However their projections were adjusted:
- New projections indicate the federal-funds rate at 0.875% by the end of 2016, down 0.50% from the December projection.
- Key portions from Statement:
** "Economic activity has been expanding at a moderate pace despite global economic and financial developments in recent months".
** "Inflation picked up in recent months however it continued to run below the 2% longer-run objective".
** Forecast for US GDP 2.2% for 2016 (prev 2.4%), 2.1% in 2017 (prev 2.2%) 2.0% in 2018 (prev 2.0%).
The dollar index is 1.1% lower at 95.602. The EUR surged higher, punching through resistance at 1.1200 whilst the AUD gapped up to a high of 0.7577.
US Treasuries: The benchmark 10-year bond yield fell 6bps to 1.91% whilst the 2 year yield plunged 10.9bps to 0.855%.
U.S. housing starts rebounded more than expected in February, hitting their highest level in five months, as builders ramped up the construction of single-family homes in a sign of confidence in the economy.
Groundbreaking increased 5.2 percent to a seasonally adjusted annual pace of 1.18 million units, the highest level since September, the Commerce Department said on Wednesday.
January's starts were revised up to a 1.12 million-unit rate from the previously reported 1.099 million-unit pace.
Strong demand for machinery and steel led U.S. factories to increase production in February, according to Federal Reserve data that suggested a manufacturing slowdown could be easing.
Overall industrial output fell 0.5 percent during the month, dragged lower by sagging oil production and a drop in utilities output.
Report from MKS news noted U.K. 2016 ECONOMIC GROWTH FORECAST CUT TO 2% VS 2.4%.
Oil prices were higher overnight, with U.S. crude futures finishing up 5.8 percent at $38.46 a barrel and Brent crude futures up $1.59, or 4 percent, at $40.33 a barrel.
However, crude oil prices remain on the defensive during the second half of the week, although the decline seems to have found decent support near the $36.00 mark.
Reference: Reuters,Business Insider, CNBC, FXStreet
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