US Fed keeps interest rate unchanged, says will be 'patient'

US Fed keeps interest rate unchanged, says will be 'patient'

The Fed said it would pause its 3-year interest rate rise campaign while assessing the weakening of the economy. Benchmark U.S. Treasury yields, which tend to set the bar for global borrowing costs, had dived significantly and Europe's big move saw Italian 2-year yields hit their lowest since May.

The statements mark a broader shift toward risk management and follow months of criticism from President Donald Trump, who hectored the central bank for raising rates too much. The S&P 500 index was up 41.05 points at 2,681.05, while the Nasdaq composite was up 154.79 points at 7,183.08.

The dispute also paused the flow of key federal economic reports, including readings on overall US growth, retail sales and factory order.

In a separate special statement on Wednesday, the Fed said it's "prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments". And by indicating flexibility on the runoff in its balance sheet, the Fed implicitly acknowledged the impact the reduction of its government securities' holdings was having on the private credit and equity markets, and by extension, on the economy. Dollar suffered another bout of bearish influence soon after Fed update as Fed Chair Jerome Powell during his post-FOMC conference speech commented that balance sheet shrinking activity would be dependent on future economic conditions in relations to WSJ reports from earlier this week. A move to tighten policy in March was already seen as a long shot, but the Fed's tone on Wednesday cast doubt on the prospects of any rate increase this year, after nine hikes since 2015.

Payrolls processor ADP reported that the United States private sector added 213,000 jobs in January, which beat forecasts for gains of 178,000.

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Contracts tied to the Fed's policy rate continued to price about a one-in-four chance of a hike in 2019, and contracts maturing in 2020 were signaling a small but rising chance of a rate cut then. But even modest increases have not been embraced by investors, with stocks tumbling in anticipation of a raise last month that boosted rates 0.25 percent to a range between 2.25 and 2.5 percent.

The Federal Open Market Committee "will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support" a strong labor market and inflation near 2 percent, the central bank said in a statement Wednesday following a two-day meeting in Washington.

USA corporate results have shown companies including Apple, Intel Corp and Caterpillar Inc are feeling pain from the slowing expansion of China's economy, which has been hurt by a trade conflict with the United States.

The euro gained 0.39 percent to $1.1475.

The Fed's policy decision was unanimous.

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