In a series of Tweets sent Tuesday night, President Trump called on the US central bank to lower interest rates in order to "rocket" the USA economy to new highs.
"Nothing of what the (Federal Open Market Committee) did today. should be read as a signal that a future change in policy is coming". Palladium gained 0.1 percent to $1,353.60, having touched its lowest since January 25 at $1,309.67 in the previous session.
Specifically, President Trump called on the Federal Reserve to lower its benchmark interest rate by as much as a full percentage point from its current range of between 2.25% and 2.50%.
On the other hand USA private demand grew at a sluggish pace in the first three months of the year, and soft inflation is continuing to puzzle Fed officials as above-trend growth and unemployment of just 3.8 per cent fail to push year-on-year price growth durably to the 2 per cent target. He repeatedly highlighted individual price declines that could prove transitory and, in doing so, pushed back against some market hopes the Fed might be preparing to lower interest rates later this year. "It really has no implications for policy", said Powell.
U.S. Treasury yields rose as investors continued to digest Powell's comments.
Italian 10-year bond yields fell three bps to its lowest in over two weeks at around 2.53 percent, while Portuguese yields hit fresh historic lows at 1.09 percent.
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"Also, the Far East market is pretty much closed with Japan and China nearly gone for the whole week and we are not seeing a lot of demand from that part of the world", Nabavi added.
The Federal Reserve offered an upbeat forecast for the US economy on Wednesday, saying that "economic activity rose at a solid rate".
"So ultimately, they will have to begin raising rates again to keep inflation contained".
The chief concern flagged in the policy statement is the now "muted" level of inflation, which continues to fall short of the Fed's 2 percent target. Many think the Fed is now more likely to cut rates than raise them, to deal with slowing growth.
Powell said in a press conference that while the Fed would be anxious if inflation ran persistently below its target, there was reason to believe that the recent weakness in price growth could prove to be transient. The U.S. dollar has also reversed and is now stronger on the day.
The economy expanded at a 3.2 per cent annualized pace from January to March, boosted by exports and inventories growth.
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"It seems like Carney, along with everyone else, is waiting for more clarity on when and if the United Kingdom is leaving the European Union", said Nancy Curtin, Chief Investment Officer of Close Brothers Asset Management. In March, the Fed had noted that headline inflation had declined but said this was "mostly as a result of lower energy prices".
On Wednesday, "we learned that an insurance cut is not imminent", said Julia Coronado, founder of MacroPolicy Perspectives LLC, a NY economics advisory firm.
Readings above 50 indicate expansion, while lower numbers indicate contraction on the 100-point scale.
After raising the key lending rate four times a year ago, the Fed voted unanimously to keep it in a range of 2.25-2.5%.
You may remember what happened next: Stocks tumbled, with investors concerned not just that higher interest rates would discourage consumers from buying homes and businesses from borrowing to invest, but that the Fed was blasé about signs of global economic weakness and appeared intent to march on with higher rates, even if they became inappropriate given economic conditions.
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