U.S. Federal Reserve ends pledge to be ‘patient,’ opens door to June rate hike

Federal Reserve Chair Janet Yellen.

WASHINGTON – The government Reserve on Wednesday moved a step closer to a significantly anticipated high quality hike since 2006 by removing \”patient\” from its language, although markets bet on the September hike after it downgraded the expected pace of growth and inflation.

Full Fed statement for March 18, 2015

Stock markets rallied after the Fed statement, as the U.S. 10-year Treasury yield dipped below 2% the very first time since March 2 and the euro rose from the dollar around the more dovish forecasts that appeared to argue against a June move.

Federal Reserve Chair Janet Yellen said dropping a pledge to be \”patient\” in raising interest rates doesn\’t necessarily mean the central bank will tighten policy in June.

\”Today\’s modification from the forward guidance should not be read as indicating that the committee has decided on the timing from the initial increase in the target range for that federal funds rate,\” Yellen said at a press conference following Wednesday\’s Federal Open Market Committee meeting. \”This change does not necessarily mean an increase will necessarily exist in June, although we cannot rule that out.\”

Yellen asserted although it\’s \”unlikely\” an interest rate increase would occur in the April meeting, \”such a rise could be warranted at any later meeting depending on how the economy evolves.\”

\”This was largely that which was expected, though some might have been fearing a more hawkish Fed, which explains the rally we\’re seeing right now, that it didn\’t state a precise time for raising rates,\” said John Carey, portfolio manager at Pioneer Investment Management in Boston.

In its statement following a two-day meeting, the Fed\’s policy-setting committee repeated its view that employment market conditions had improved. As the statement put a June rate increase up for grabs it also allowed the Fed enough flexibility to maneuver later in the year, stressing that any decision depends on incoming data.

\”The committee anticipates that it will be appropriate to raise the target range for the federal funds rate if this has seen further improvement within the labour market and is reasonably confident that inflation will move back to its 2% objective within the medium-term,\” the Fed said in the statement.

The Fed said an interest rate increase remained \”unlikely\” at its April meeting and said its alternation in rate guidance did not mean the central bank has decided on the timing of the rate hike.

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