Fed maintains interest rates amid inflation concerns

Federal Reserve's Preferred Inflation Measure Seen Steady in December

It also said its interest rate setting committee had unanimously selected Powell to succeed Yellen, effective tomorrow.

Chief U.S. economist, Kevin Logan, made a statement, "They're more confident in their expectations of rising inflation". The most likely dates are in March, June, September or December, where incoming Fed Chair Jerome Powell has scheduled news conferences to explain monetary policy.

The main indexes began the day higher, but sunk into negative territory after the Fed released its monetary policy statement at 6.00am (AEDT).

The fact that the final deal put in place a "lot more spending in the first couple of years" will add to "increasing conviction" that they will get three rate hikes in this year, Martin said.

And Shepherdson noted that business investment was up 7.9 per cent in the final quarter of 2017, with the energy industry reversing recent declines in spending on equipment. The Fed has penciled in three interest-rate increases this year.

Federal Reserve's Preferred Inflation Measure Seen Steady in December

The U.S. Fed kept its policy interest rates on hold today during its FOMC meeting, as was widely anticipated. It closed the month at 80.73 USA cents, and started February around 80.50 United States cents in early Asian dealings this morning. Fed officials are hoping to keep a tight labor market from overheating without raising borrowing costs so fast that it would stifle the economy. First-time jobless claims applicants are expected to have increased during the week ending January 27, though not by much and to still remain well below the 300k threshold that's associated with a healthy labor market. But Treasury Inflation Protected Securities, a hedge against inflation, are at their highest since 2014.

Manufacturing PMI's for January from Spain, Italy, France and Germany are all expected to point to a continuation of the solid themes of 2017 with expectations of 55.7, 57.7, 58.1 and 61.2 respectively, following on from decent numbers out of Japan and China in Asia earlier today with Japanese manufacturing coming in at its highest level in almost 4 years. Zandi expects the Fed to accelerate its pace of increases because he thinks unemployment will fall further, leading to wage increases and a pickup in inflation.

As expected, the Fed left interest rates unchanged on Wednesday after its January policy meeting. "It will be interesting to see if, as the new chairman takes the helm, the inflation story changes". Many analysts were looking for an adjustment to the "roughly balanced" wording in that statement, which might have indicated that the Fed was thinking that inflation would rise.

At the end of last week the US Dollar fell to year lows against several currencies as US Treasurer Steven Mnuchin talked rather freely about his comfort with the US Dollar weakening in order to strengthen US exports.

"It's a continuation of what they've been saying before, the wording was very little changed", said John Bredemus, head of capital markets at Allianz Investment Management in Minneapolis. Markets are giving the Fed the green light to raise rates.

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