The Federal Reserve has left interest rates and bond buying unchanged but is encouraged by a “strengthened economy”.
“Amid progress on vaccinations and strong policy support, indicators of economic activity and employment have strengthened,” the central bank said.
The result of the FOMC result is as analysts expected but the vaccine rollout and additional stimulus has helped the economy recover in the past few months.
Job growth has accelerated as restrictions start to ease and GDP growth is expected to be as high as eight per cent this year, the fastest pace since 1983.
However it urged caution as the rebound in growth depends “significantly on the course of the virus, including progress on vaccinations… The ongoing public health crisis continues to weigh on the economy and risks to the economic outlook remain.”
Analysts predict any change to its policy will not come until the FOMC’s June meeting when it will have updated economic and inflation forecasts to work with.
All eyes will now turn to Jerome Powell’s press conference shortly where the Fed’s economic outlook will be in focus. Powell has previously been insistent on waiting for the outcomes of these forecasts before reacting with any guidance adjustments, rather than anticipating them.
The Fed has said it will want to see three quarters of the population vaccinated in order to begin tapering discussions.
“By keeping the QE taps wide open, the Fed are only fuelling the fire, which will eventually require faster tightening to put out the flames,” Fawad Razaqzada, market analyst with ThinkMarkets said.
“Against this backdrop, you would have to think that the US equity markets, especially growth stocks whose yields are low, might struggle going forward (see below for more). The dollar is also likely to come back against some weaker currencies, especially against those where inflation is not too much of a concern – such as the Japanese yen and Swiss franc.”