FOMC left Federal Funds Rate unchanged -by- Michael Oyebamiji

March 17, 2016 by

The FOMC last night kept the federal funds target rate unchanged at 0.50% and revised down the number rate hike expected in 2016 from 4 hikes to just 2 hikes and expects rate to be at 0.875% at the end of the year. FOMC sees rate at 1.875% by 2017 and 3% in 2018. The committee decided to put a pause due to weak global economic outlook and financial market volatility.

FOMC also expect inflation to rise at oil price is starting to pick up; they expect inflation to reach 1.9% and 2% in 2017 and 2018 respectively. The committee also expect economic output to increase by 2.2% in 2016 which is 0.2% downward revision from December statement. Despite the strong recovery in the labour sector, wages remains low but the committee expects unemployment to drop to 4.7% and 4.5% in 2017 and 2018 respectively.

US Dollar index dropped by almost 1% after the FOMC meeting last night and it is current trading towards a support level at $94.9. A break below this level will see dollar index drop down as low as $94.00. Gold rallied to as high as $1266 last night on the back of weaker Dollar. USDJPY remains under pressure and is currently trading below 112 which mean prices might test the yearly lows at 110.9. EURUSD remains bullish and it is currently trading comfortably above the 1.120.

Also, later today the Bank of England is expected to release their Interest Rate Decision. rate is expected to remain unchanged at 0.50%. GPB has been on a rally since last night after FOMC meeting due to weak USD.