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Summary
- Despite some economic recovery, Federal Reserve is set to keep its monetary policy stance unchanged
- Fed feels that although there is a good economic backdrop, the inflation and maximum employment targets are still way off.
- The NZ dollar gained some ground on the news
Even though the U.S is on the path of economic recovery and has undone substantial part of the damage done by the COVID-19 pandemic, it is clear that the Federal Reserve (Fed) is not going to change its accommodative monetary policy stance in its meeting on Tuesday.
The signs of this stance were clear in the last meeting held on March 17, when the chairman, Jerome Powell had clarified that the Fed had deployed monetary policy tools to give support to the economy so that the recovery was complete.
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Fed to continue the accomodative stance
He had said that the Fed would continue the accommodative stance in the monetary policy till inflation and employment outcomes are met. He made it clear that the economy was a long way off from the employment and inflation targets and it was going to take some time before the goals were met.
So, after making it amply clear in his last statement, it would be a surprise if any tapering of bond purchases is done and interest rates increased.
All data is pointing towards the economic recovery In the U.S. Labor department showed unemployment claims had hit a low, and almost 916,000 jobs had been regained in March.
The retail sector also saw an improvement. Sales increased in March to a level 27.7% higher than a year earlier.
Yet, there is more to be desired. Even though hiring picked up, 17 million people still remain out of work, Jerome Powell said and warned that until the economy doesnot reach the “maximum employment” levels and inflation targets, the monetary policy stance would remain the same.
NZ Dollar Gains
The New Zealand dollar rose against the US dollar on Tuesday as it became clear that the Fed would not taper bond purchases in its meeting. The currency price was also fueled due to a rise in the price of iron ore. The NZ dollar rose 0.39% at $0.7216. The NZ dollar has been resilient to movements and for the month of April, its gains would be at almost 3.3%.
Markets Weak
The NZX 50 was in red on Tuesday, taking its cues from other Asian markets. In Tuesday’s trade, Asian markets were mostly lower - Korea’s Kospi was 0.05% lower, China’s Shanghai Composite index shed 0.18%, Japan’s Nikkei declined 0.17% to 29,087, and Hong Kong’s Hang Seng dropped 0.26%.
Gold Prices climb
Spot gold also gsined 0.2% at US$1,780.16 an ounce and the US gold Futures rose 0.1% at US$1,780.10 an ounce.
