AUD/USD Surges to above 0.7550 after Fed Revises Rate Outlook

Local shares are poised to open higher, with the $A already surging, after the US Fed pointed to a more cautious rate rise outlook. Local jobs data pending.  The Aussie has risen 1.2 per cent. The Federal Reserve held interest rates steady, as expected, and indicated that while the US economy is strengthening, the central bank sees a more gradual path to higher rates.

AUDUSD_20160317

“A range of recent indicators, including strong job gains, points to additional strengthening of the labour market. Inflation picked up in recent months,” the Fed said in a policy statement in which it kept the target range for its overnight lending rate at 0.25 per cent to 0.50 per cent. “However, global economic and financial developments continue to pose risks” and will keep inflation low for the remainder of 2016, it said. It also revised its economic projections.

The median of Fed officials’ projections, known as the “dot plot,” saw the federal funds rate at 1.875 per cent at the end of 2017, compared with 2.375 per cent forecast in December. The end-2018 level fell to 3 per cent, from 3.25 per cent, with the longer-run projection at 3.25 per cent, down from 3.5 per cent. Policy makers maintained their projections on how soon inflation will return to the Fed’s 2 per cent target, while cutting their inflation forecast to 1.2 per cent this year from 1.6 per cent. Officials still see the preferred price gauge rising 1.9 per cent in 2017 and 2 per cent in 2018.

AFR