In a unanimous decision, the Federal Reserve opted to maintain the target range for the benchmark federal funds rate at 5.25% to 5.5%, downplaying the possibility of immediate rate hikes. This decision followed a series of data releases indicating stubborn inflation pressures.
Fed Chair Jay Powell emphasized that it’s unlikely the central bank’s next move would involve raising rates, highlighting the need for compelling evidence that current policy is not tight enough to bring inflation back toward the 2% target. Powell skillfully avoided discussions about rate hikes, maintaining a cautious stance.
Following the Fed’s decision, the dollar index experienced a second consecutive day of decline, reflecting the drop in US yields.
Investors are now looking to the upcoming April non-farm payrolls data scheduled for release on Friday for further insights into the US economy’s health. Analysts at Saracen anticipate an unchanged unemployment rate of 3.8%, suggesting that hiring remains robust, potentially complicating the Fed’s policy decisions.
In commodity markets, oil prices staged a partial recovery from Wednesday’s losses, driven by concerns over weakening demand exacerbated by a significant increase in US crude inventories. Meanwhile, gold prices advanced as investors found reassurance in the Fed’s indication of a willingness to pivot towards lowering borrowing costs once it gains confidence that price gains are moderating.