Fed holds on rates | Advisor.ca

As most expected, the Federal Reserve is maintaining the target range for the federal funds rate at 0.25% to 0.5%.

The Federal Open Market Committee (FOMC) statement notes “[i]nflation has continued to run below the Committee’s 2 percent longer-run objective, partly reflecting earlier declines in energy prices and falling prices of non-energy imports.”

The statement provides nothing in the way of hints as to timing of future hikes. “[T]he Fed […] didn’t point a finger at the June meeting in terms of timing the next hike,” says Avery Shenfeld, chief economist at CIBC Capital Markets. “While there was still one hawkish dissent, there were no code words that indicated a move was coming soon, with no reference to a balance of risks, nor, as we saw last October, a direct reference to [the] next meeting.”

Additional observations from Prab Sagoo, associate director at Nasdaq Advisory Services:

The Fed reaffirmed it’s very gradual approach and reiterated that it is not in any particular hurry, providing further reassurance to a skittish market.

International concerns from the committee appear to have eased somewhat, though they remain wary of low inflation.

TSX has climbed ~30 points, led by a rebound in oil prices which jumped to session highs on the announcement. This helped propel a number of sectors higher including energy and financials. Materials lost some ground as investors rotated out of the safety of gold stocks. Canadian Treasury yields dropped, while the Canadian dollar made slight gains against the U.S. dollar following the announcement.

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