Fed: Interest Rates to Remain Steady for Now

Dollar Recovery May Also Claim Gold and Oil as Victims

Asian shares were subdued on Thursday ahead of anxiously-awaited Sino-U.S. trade talks, while the U.S. dollar consolidated recent bumper gains after the Federal Reserve reaffirmed the outlook for more rate hikes this year. Leslie Preston, Senior Economist, TD Bank Group, speaks to Sara D'Elia about noteworthy changes in the Fed's take on inflation and the expected pace of rate hikes going forward.

The Federal Reserve's monetary policy-making committee concluded its two-day meeting by issuing a statement about its views of the economy. If confirmed, Jerome Powell will succeed Janet Yellen as chair of the USA central bank.

In a reaction to the policy statement, USA stocks pared their early losses, but ended down. The Nasdaq Composite Index was up 0.64 points, or 0.01 percent, to 7,131.34. "We continue to forecast three more hikes this year-in June, September and December".

Here are the key takeaways from the policy meet of the Federal Open Market Committee.

Analysts interpreted its comments on inflation as a signal the Fed may allow prices rises beyond its target, a stance that would limit the need for the central bank to embark on a more aggressive path of monetary tightening in response to recent rises in inflation.

"On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 per cent", it said in the statement. Experts say the two-percent target is symmetric, meaning it would be equally problematic if inflation lingers too far above or below that level.

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The Fed's latest "dot plot" now forecasts another two rate rises this year, although some analysts see three increases as possible.

The Fed also said risks to the economic outlook appear roughly balanced and reiterated its expectation that economic conditions will evolve in a manner that will warrant further gradual increases in interest rates. On Wednesday, the Fed changed this language to note that business investment "has continued to grow strongly". It also highlighted that the job gains have been strong in recent months, and the unemployment rate stayed low. United States growth remains robust, but the euro area economy recorded its slowest expansion in 18 months during the first quarter.

Those who voted were Jerome Powell, Chairman; William Dudley, Vice-Chairman; Thomas Barkin; Raphael Bostic; Lael Brainard; Loretta Mester; Randal Quarles and John Williams.

The Fed's preferred Personal Consumption Expenditures price index hit the central bank's two-percent target in March for the first time in almost a year, while "core" PCE inflation, which excludes volatile food and energy prices, was 1.9 percent.

Many on Wall Street think the economy is accelerating so quickly that the Fed will have to hike rates three more times in 2018 to keep the economy from overheating.

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