US interest rates are thought to be on their way up sooner rather than later after the US Federal Reserve dropped the word "patient" from its monetary policy statement.
Traders took from the removal of the word that a move on rates could come before the end of the year at least, though the Fed voted unanimously to keep the level at 0% to 0.25%.
At a press conference following the statement, Fed chairman Janet Yellen told reporters that any decision to raise rates in June would depend on the data as it is made available to the rate-setting Federal Open Market Committee.
She said: “Just because we removed the word ‘patient’ does not mean that we are going to be impatient.”
Just last month, Yellen said that the Fed would look at increasing the cost of borrowing on a meeting-by-meeting basis, but continued evidence of strong US economic performance may mean a rate rise as soon as June.
However, the Fed is looking for signs of continued strength in the US jobs market before raising rates, and yesterday noted that growth has “moderated”.
The committee also trimmed its economic growth forecasts for the next three years.
Wall Street rallied on the back of the statement, with the Dow Jones up more than 150 points within minutes of its release.
The Fed said: “Labour market conditions have improved further, with strong job gains and a lower unemployment rate…
“The committee continues to see the risks to the outlook for economic activity and the labour market as nearly balanced… An increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting.”
Yellen noted that the US economy remains somewhat mixed, despite several good recent headline numbers.
Similarly to January’s post-meeting statement, the Fed highlighted the weak energy market, slower export growth, household spending and below-target inflation as areas of concern.
Not only has inflation remained below the long-term 2% target, Yellen told reporters that energy costs – with the oil price slumping since last summer – have driven inflation even lower.
