Why the Fed’s vision about gradual rate hikes hasn’t changed?

Why the Fed’s vision about gradual rate hikes hasn’t changed?

After the end of the two-day policy meeting on Wednesday, the Federal Reserve opted to leave interest rates unchanged, while had not hinted to any change to their plans to raise the borrowing cost two more times this year.

The graph describes the three key reasons that would induce the Fed to continue with their gradual rate hikes this year.

At 4.5 percent unemployment rate in March, joblessness is near the maximum employment mandate and labor market conditions look strong, ahead of the non-farm payrolls figures due on Friday.

Despite the slowdown on price gains in March, headline inflation reached 1.8 percent, which is near the longer-run objective of 2 percent.

Finally, the Fed saw the ease in growth pace in the first quarter as “transitory,” while stressed: “Near-term risks to the economic outlook appear roughly balanced.”

Ahmed Mamdouh

Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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