Federal Reserve keeps rates unchanged

The US Federal Reserve has kept interest rates on hold in the range of 0.75 per cent to 1 per cent as expected, however they have left open the possibility of raising them next month. The reason for keeping monetary policy unchanged was due to a slowdown in growth during the first quarter of the year, however the Fed are generally optimistic about the overall health of the US economy, with the view that this slowdown in growth is more likely to be transitory. They highlighted the strength of the labour market, solid consumer spending and business investment and inflation which is close to their target rate. The probability that the Fed raises rates by 0.25 per cent next month has risen to 90 per cent and this has been reflected in bond markets, with Treasury yields moving higher as markets price in a June hike.