The Federal Reserve left interest rates unchanged on Wednesday, but kept the door open to a hike in June while showing little sign it was in a hurry to tighten monetary policy amid an apparent slowdown in the U.S. economy.
The Fed kept the target range for its overnight lending rate in a range of 0.25 percent to 0.50 percent, in line with expectations in a Reuters poll. The central bank raised rates in December for the first time in nearly a decade.
The Fed's focus moving ahead will be on employment, economic growth, and perhaps most importantly whether inflation begins to show any evidence of increasing from its current low level to the central bank's 2 percent target.
Traders kept their bets that the first rate hike of 2016 would come in September and gave less-than-even odds of a follow-up hike by December. Fed policymakers in March forecast two hikes this year.
Investors currently see a 23 percent probability that the Fed's overnight lending rate will rise in June, up from 21 percent prior to the decision, according to CME's FedWatch group
Kansas City Fed President Esther George dissented for the second consecutive meeting on Wednesday, citing the need to raise rates by a quarter of a percentage point.
Pending home sales increased slightly in March for the second consecutive month and reached their highest level in almost a year, according to the National Association of Realtors®. Only the West region saw a decline in contract activity last month.
The Pending Home Sales Index,* a forward-looking indicator based on contract signings, climbed 1.4 percent to 110.5 in March from an downwardly revised 109.0 in February and is now 1.4 percent above March 2015 (109.0). After last month’s slight gain, the index has increased year-over-year for 19 consecutive months and is at its highest reading since May 2015 (111.0).
The focus now will turn to the Bank of Japan's policy decision expected later in the session.
The BOJ's policy decision, which is often announced around 0300 GMT, will be a close call. Policymakers are likely hesitant to take further steps after unveiling their negative interest rate policy in January, though a strong yen and receding inflation expectations could prompt them to ease further.
Oil prices rallied overnight. Brent rose 3.1% to $47.18 whilst Nymex gained 2.9% to $45.33.
Oil prices jumped about 3 percent on Wednesday, hitting new highs for 2016 as the dollar weakened after the Federal Reserve announced it would leave U.S. interest rates unchanged.
Oil had risen early, the day after an industry group said U.S. crude inventories had dropped in the latest week. But prices retreated after the U.S. Energy Information Administration reported in the morning that crude stocks climbed 2 million barrels last week to an all-time peak of 540.6 million barrels.
Reference: Reuters
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