Fed holds rates, suggests low gradual increases

The Federal Reserve delivered its policy statement on Wednesday and indicated that rate increases will be gradual and data dependent.

The Fed said it is closely watching the volatility in financial markets and slowing overseas growth but signalled it would not rush to judgment over what the developments mean for its plans to raise short-term interest rates again.
The central bank’s first meeting of 2016 was clouded by weeks of turmoil in equities and plunging commodity prices but left interest rates unchanged at 0.25-0.5 per cent on Wednesday.

In a statement the Fed suggested it had concerns about the gyrations around the world, but it attempted to leave its policy options open even as traders bet that policymakers would leave rates unchanged until the second half of the year.

The Fed pushed through a landmark interest rate increase in December despite worries within its policymaking committee about stubbornly low inflation. On Wednesday, US stocks sagged as investors digested the Fed’s statement, with the relatively brief and indirect mention of the recent turmoil on balance weighing on sentiment.

The S&P 500, after briefly edging higher after the announcement, later fell again and closed down over 1 per cent. The 10-year Treasury yield edged just below the 2 per cent mark.

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