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Federal Reserve statement sends US markets higher US stocks surge after Fed promises "patience" on rates
(35 minutes later)
The US Federal Reserve has said it will be "patient" over any decision to raise interest rates at the end of its two-day policy meeting in Washington DC. The US Federal Reserve has said it "can be patient" over any decision to raise interest rates at the end of its two-day policy meeting in Washington DC.
The statement sent US markets higher with the Dow Jones rising nearly 300 points.The statement sent US markets higher with the Dow Jones rising nearly 300 points.
Investors have been anxious about when the US central bank will raise its short term interest rate.Investors have been anxious about when the US central bank will raise its short term interest rate.
That rate has been kept at 0% since late 2008, when the Fed slashed rates in the wake of the financial crisis.That rate has been kept at 0% since late 2008, when the Fed slashed rates in the wake of the financial crisis.
However, as the US recovery has taken hold, the Fed, under chair Janet Yellen, has begun easing the measures it was taking to boost the US economy.However, as the US recovery has taken hold, the Fed, under chair Janet Yellen, has begun easing the measures it was taking to boost the US economy.
It ended its bond-buying programme known as quantitative easing in October, leading many investors to focus on when the Fed would begin to raise its short-term interest rate, known as the federal funds rate.It ended its bond-buying programme known as quantitative easing in October, leading many investors to focus on when the Fed would begin to raise its short-term interest rate, known as the federal funds rate.
Open to interpretation
Most observers had interpreted language used in the Fed's previous statements - suggesting that it would wait a "considerable time" before raising rates - as meaning the change would come some time in mid-2015.Most observers had interpreted language used in the Fed's previous statements - suggesting that it would wait a "considerable time" before raising rates - as meaning the change would come some time in mid-2015.
However, the addition of language indicating the Fed will be "patient" in its rate-raising decision has led many analysts to believe that a rate raise could be further off.However, the addition of language indicating the Fed will be "patient" in its rate-raising decision has led many analysts to believe that a rate raise could be further off.
"Based on its current assessment, the Committee judges that it can be patient in beginning to normalize the stance of monetary policy," the Fed said in the statement. "The 'considerable time' language was interpreted as 'can be patient'," wrote Ward McCarthy, chief US economist at Jefferies investment bank, in a note to clients.
Chair Yellen is scheduled to discuss the statement and the central bank's thinking in a press conference set to begin shortly. "The ambiguity is intentional and intended to maximize policy flexibility."