On Wednesday, the Federal Reserve announced that the federal funds target range will remain unchanged between 0.25% and 0.5% after a two-day policy meeting, offering also an overview regarding March’s meeting agenda. While the decision was expected on the market, interest laid in the statement itself. FOMC (Federal Open Market Committee) reiterated that the changes in the economic environment will most certainly generate rate hikes, highlighting also that the growth pace will be dictated by the data inflow. In the release, Fed referred at the recent market turbulences as being closely monitored and assessed by evaluating the degree in which they influence the labor market and the inflation pace, gradually increasing risks in the outlook.
Also, references regarding that the risks for the labor market and activity are balanced were removed completely. The same thing happened with the confidence tag for the mid-term inflation target.
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During this same day, New Zealand’s Reserve Bank decided that the OCR (Official Cash Rate) will remain unchanged for the time being at 2.5%. For which regards the inflation, the RBNZ stated that although the headline CPI inflation (Consumer Price Index) is low – mainly due to the fall in oil prices, there are expectations for an increase later in 2016, taking a longer for the target to be reached. They said that the monetary policy will remain accommodative while further policy easing might take place in the last part of 2016 in order to ensure that the inflation will settle near the middle of the target range for the year-end. RBNZ also acknowledged the increase in market volatility with the global inflation remaining low and the oil prices continuing to weaken. Despite the economic slowdown in late 2015, the bank expects a better growth pace in 2016, saying that they may consider appropriate depreciation in the exchange rate as the weakness in export prices in becoming a recurring threat.
Watching yesterday’s price trend, we can see the US oil futures went up to a 2 week and a half high after the Russian oil minister brought forward a scheme in which all oil producing countries need to cut their output by 5%. The meeting took place on Tuesday, the minister saying that the solution was brought forward by Saudi Arabia. The second trigger was the Baker Hughes report, which said that oil rigs worldwide could reduce their production as much as 30% by the end of 2016. Prices jumped over the $34 per barrel threshold for the first time since the 12th of January.