USA interest rate rise in June '100% certain' after Fed delays

The greenback is approaching the 110 yen level not seen since FebruaryMore

The greenback is approaching the 110 yen level not seen since FebruaryMore

It downplayed a recent slowdown in economic and job growth, saying the activity had been expanding at a moderate rate and job gains, on average, had been strong in recent months.

The biggest development in the statement, however, was a tweak in the Fed's language with respect to inflation.

After the Commerce Department's index of household spending - the Fed's preferred inflation gauge - was reported at 2% in March, Wednesday's statement said that inflation had "moved close" to the target.

Inflation is a growing concern as businesses are starting to raise prices.

Data on Thursday showing euro zone inflation slowing further last month could cement that view, especially after the Fed showed no sign of swerving from its tightening path after its policy meeting, calling recent USA inflation rises sustainable.

Fundamentally, concerns around twin-deficits (Current account and fiscal balance) for the U.S. continue to weigh on the dollar even as the pickup in inflationary pressures is proving to be beneficial (through rise in interest rate expectations). In March, personal consumption expenditures (PCE) rose 1.9% over the prior year when stripping out food and energy. Any undershooting of the 1.2% core inflation estimate could extend losses for the single currency today. Officials indicated in March they expect a total of three or four hikes in 2018, including the move they made at that meeting.

US dollar notes are seen in this November 7, 2016 picture illustration.

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USA 10-year yields were at 2.970 percent, down from 2.976 percent late on Tuesday. All eyes turn to the Fed's next meeting in June, when rates are set to go up.

The FOMC next meets in June, when it is widely expected to raise the key rate by 25 basis points to two percent.

Inflation had remained stubbornly low during 2017, due largely to temporary factors like low mobile phone plan prices, which baffled officials who expected the very strong pace of hiring would pressure wages and push prices higher.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.

The committee says it expects "economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run".

In maintaining the federal funds rate in the range of 1.5-1.75%, the committee stressed its inflation target is "symmetric". In this regard, the Fed seems to be telling the markets that it won't overreact, possibly because abrupt and aggressive monetary tightening could jeopardize the economic expansion and the ongoing recovery in corporate earnings.

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