Reuters: The Federal Reserve left interest rates unchanged on Wednesday, but kept the door open to a hike in June while showing little sign it was in a hurry to tighten monetary policy amid an apparent slowdown in the US economy.

In a statement that largely mirrored the one issued after its last policy meeting in March, the US central bank’s rate-setting committee described an improving labour market but acknowledged that economic growth seemed to have slowed.

It also said it was closely watching inflation and noted that global economic headwinds remained on its radar, though it made no mention of the risks they posed, as it had last month.

“The committee continues to closely monitor inflation indicators and global economic and financial developments,” the Fed said following a two-day meeting.

Prices for US equities edged up after the announcement, while the dollar  was little changed against a basket of currencies. Prices for longer-dated US Treasuries rallied.

Traders kept their bets that the first rate hike of 2016 would come in September and gave less-than-even odds of a follow-up hike by December. Fed policymakers in March forecast two hikes this year.

Investors currently see a 23% probability that the Fed’s overnight lending rate will rise in June, up from 21% prior to the decision, according to CME’s FedWatch group.

“This latest statement has not laid out a strong position for a June rate hike,” said Bill Irving, a portfolio manager with Fidelity Investments.

The Fed kept the target range for its overnight lending rate in a range of 0.25% to 0.50%, in line with expectations in a Reuters poll. The central bank raised rates in December for the first time in nearly a decade.

‘Wait-and-see’ mode

The Fed, which has tried to move away from issuing forward guidance since embarking on a rate hike path it has described as gradual, made no mention of how it viewed the balance of risks to the economic outlook. It was the third straight policy statement in which policymakers had kept mum on that detail.

The Fed acknowledged that growth in household spending had moderated, but said households’ real income had risen at a “solid rate” and consumer sentiment remained high.

Noting a recent pick-up in inflation, the Fed expressed confidence that it would rise to its 2% target over the medium term, while reiterating inflation was expected to remain low in the near term.

Despite strong job gains and a national unemployment rate of 4.9%, Fed policymakers have previously said they would proceed cautiously in raising rates again due to the uncertainty in the world economy and a lack of inflation pressures at home.

“I think they are in wait-and-see mode,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Asset Management.

The Fed was spooked earlier in this year by a global equities sell-off and the tightening of financial markets largely on concerns of an economic slowdown in China.

Stocks have continued to rally since Fed policymakers met in the middle of March and investors’ nerves have been soothed by an apparent pick-up in China.

Other major central banks have been grappling with ways to deal with lacklustre economies, including the adoption of negative interest rates.

With US interest rates still close to zero, the Fed is concerned it would have to rely on more unconventional policy tools should the economy take a turn for the worse.

Asia shares, FX rise after Fed

Reuters: Asian stocks edged higher on Thursday as the US Federal Reserve appeared to be in no hurry to raise interest rates, while oil consolidated gains after hitting a 2016 peak.

MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.4%. Hong Kong stocks rose more than 1%, while S&P 500 e-mini futures edged up 0.1%, after Wall Street posted solid gains overnight.

In its statement issued after its meeting on Wednesday, the Fed left interest rates unchanged on Wednesday, but kept the door open to a hike in June while showing little sign it was in a hurry to tighten.

“The committee continues to closely monitor inflation indicators and global economic and financial developments,” the Fed said following its two-day meeting.

Scotia Bank currency strategist Gao Qi said while a 25 basis point increase is likely in the coming months, the timing still remained uncertain, indicating the Fed was in no rush to lift interest rates again soon after a December rise.

Led by the New Zealand dollar, Asian currencies rallied against the greenback as investors took the Fed statement as a sign to head for relatively higher yielding currencies.

Only the Japanese yen was trading weaker against the dollar ahead of a BOJ’s policy decision, which is often announced around noon in Tokyo, or 0300 GMT, will be a close call.

Policymakers may be hesitant to take further steps after unveiling their negative interest rate policy in January, though a strong yen and receding inflation expectations could prompt them to ease further.

Data issued early on Thursday showed Japan’s core consumer price index fell 0.3% from the year-ago period, compared with economists’ median estimate for a 0.2% gain.

Separate data showed industrial output rose more than expected and labour demand jumped to the highest in two decades, but renewed worries about weak private consumption are likely to temper any optimism about the economy.

“USD/JPY is likely to fall steeply if there is no change in policy,” Sean Callow, senior currency strategist at Westpac in Sydney, said in a note to clients. “Most likely there will be at least some tweaks of the existing suite of policies.”

The dollar edged up 0.2% to 111.73 yen, moving back toward a three-week high of 111.90 notched on Monday.

The euro was steady at $ 1.1301.