Dollar Paring Gains After Fed Leaves Rates Unchanged

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The United States Federal Reserve (EDF) has chose to keep interest rates between 1.5% and 1.75%, although with intention more than likely to raise m in June.

World stocks traded flat Thursday as worries over global trade tensions weighed, while the US dollar consolidated recent bumper gains after the Federal Reserve reaffirmed the outlook for more rate hikes.

Bond prices moved slightly higher and stocks waffled after the Fed sounded slightly less "hawkish" than expected and failed to end the debate on how many times it will hike rates this year. Wednesday's announcement was not accompanied by a press conference with Fed chair Jay Powell nor were updated economic forecasts from the Fed released.

The Fed, in a statement released after its two-day policy meeting, offered nothing to dispel market expectations that it will deliver its second rate increase of the year when it meets in June. The change in the regulator's statement is key because it is believed that such a level of inflation is healthy and is a signal to continue the policy of raising interest rates.

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United States 10-year yields were at 2.970 percent, down from 2.976 percent late on Tuesday.

The Fed also indicated that inflation has firmed, coming closer to the Fed's two percent target.

The Fed's preferred measure of inflation soared 1.9 percent in the 12 months through March, the biggest increase since February 2017, after increasing 1.6 percent in the year through February, the US Commerce Department reported. One exception is Goodfriend, who has favored changes pushed by conservatives to limit the Fed's flexibility in rate decisions.

The dollar has been buoyed in recent weeks by the strong US economic outlook and rising yields amid signs of a slowdown in some other developed economies, especially in Europe. Trade talks between US Treasury Secretary Steven Mnuchin and Chinese Vice-Premier Liu He are set to start later today (03/05). Last week, the 10-year moved above 3% for the first time in four years.

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The Fed's comments on the labor market were also of interest: as in March it said that the labor market "continued to strengthen.".

It held short-term rates unchanged at 1.5% to 1.75%, but that will change, soon, probably at the Fed's meeting in mid-June. The Fed is gradually tightening credit to control inflation against the backdrop of a tight job market, a resilient economy and a pickup in consumer prices.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.

"The stance of monetary policy remains accommodative, thereby supporting strong labour market conditions and a sustained return to 2% inflation", the Fed said. It added that risks to the outlook appear roughly balanced, removing a prior reference to "near-term risks".

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"Inflation on a 12-month basis is expected to run near the committee's symmetric 2 per cent objective over the medium term", the policy-setting Federal Open Market Committee said in a statement on Wednesday in Washington.

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