Fed stays put on interest rates

US central bankers chose to stay put on policy at Wednesday´s meeting of the Federal Open Market Committee.

The target range for the so-called Fed funds rate was kept at between 0.25% and 0.50%.

Initial market commentary highlighted the omission from the Fed´s policy statement of any reference to poor economic conditions overseas.

In their statement, rate-setters called attention to the "solid" increase in households´ real, or inflation-adjusted, income and strong job gains.

However, market-based measures of inflation compensation were described as still "low".

In an initial reaction, the Dow Jones Industrials was edging higher by 0.24% or 43.87 points to 18,032, alongside an S&P 500 which was little changed, edging higher by 0.02% to 2,092.42.

The yield on the benchmark 10-year US Treasury note was lower by four basis points to 1.88%.

Esther L.George again called for an immediate 25 basis point hike in rates, the same as in March.

“Fed officials, including Chair Janet Yellen, have expressed worries about a softening of economic growth so far this year, anaemic and fragile global economic growth, a strong dollar and financial market volatility. Yet the labour market continues to impress, with a strong rate of job creation being sustained in recent months, and consumer sentiment remains elevated.

“The Fed’s issue is finding the right window to hike rates, and telegraphing that intention early enough to not unsettle the markets. June looks a distinct possibility, but it will require the data flow to improve in May," said Chris Williamson, chief economist at Markit.

"The statement, however, is more hawkish than we expected. The reference to global risks has been dropped completely, having appeared in each statement since last September. It's surely not a coincidence that this change follows the rebound in global stocks and the hefty bounce in the latest PMI surveys from China, but we had expected the Fed to wait for confirmation that the latter would be sustained," said Ian Shepherdson, chief economist at Pantheon Macroeconomics.