The One Surprise in Today's Fed Statement

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The Federal Open Market Committee held the fed funds rate target at a range of 1.5% to 1.75%. Officials indicated in March they expect a total of three or four hikes in 2018.

"Overall, we do not expect the upcoming meeting to change market pricing or perceptions of what the Fed is likely to deliver", BNP Paribas Chief Market Economist Paul Mortimer-Lee said in a statement before the meeting.

Treasury yields were at first rose before falling, with the 10-year note yield trading at 2.96 percent and the two-year yield below a near 10-year high.

This assessment was supported by this week's Personal Consumption Expenditures Index which rose to 1.9 percent in March, the highest since February 2017. The Fed said job gains have been "strong, on average" in recent months. Another view is that growth of household spending moderated from the strong pace in the fourth quarter. Now, "inflation on a 12-month basis is expected to run near the Committee's symmetric 2 percent objective over the medium term".

The Fed expressed a confident economic outlook, saying activity had expanded at a moderate rate and that inflation was close to its 2 percent target. Ahead of the statement, some investors were nervous it might sound more hawkish on policy tightening after recent concerns about rising inflation.

The Fed's latest "dot plot" now forecasts another two rate rises this year, although some analysts see three increases as possible. As rates rise, Americans feel it because their credit card rates also climb, as do the rate for mortgages, auto loans and small business loans.

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"Market-based measures of inflation compensation remain low". Fears over a widening account deficit, inflation more than double the central bank target and an ongoing reoccurrence of political risk is going to continue discouraging traders from purchasing the Turkish Lira at its historic low levels.

Yesterday the USA dollar advanced to positive territory for the year as US interest rates worked higher. The Fed also believes that the risks to economic outlook appear roughly balanced. The unemployment rate is at a 17-year low of 4.1 percent, below the Fed's longer-run estimate of what constitutes full employment, and there are signs wages are moving firmly higher after an extended period of sluggishness. The fact is that they are not in a rush to raise rates faster. Markets are now pricing in an additional two rate hikes this year.

The interest rate increase in March was the first major policy move that the Federal Reserve undertook since its new chair, Jerome Powell, succeeded Janet Yellen.

Late past year, officials began to revise up their growth projections due to the tax cut legislation, but they held back from revising their interest-rate projections because of low inflation readings.

Currently, the futures market assigns 45 percent odds of three more quarter-point rate hikes before the end of the year, and that's something that hasn't been fully priced into stocks and bonds.

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