Fed keeps interest rates on hold

The Fed meeting ended on Wednesday with the expected announcements. The stock market reacted by rising, with the US dollar declining against a basket of major currencies.

The Fed's March two-day meeting ended Wednesday with predictable statements about keeping rates at zero, but the central bank changed its economic forecasts and positions on some issues from the statements made last December. In this period between scheduled meetings of the FOMC, the Federal Open Market Committee of the Fed, the US government passed two economic assistance bills $900bn in December and $1.9 trillion last week as well as a massive public vaccination campaign to end the COVID-19 pandemic.

Analysts said the Fed's more optimistic than expected statements boosted optimism in the stock market and indices reacted with gains at the close of trading on Wednesday, with the Dow Jones up 0.58%, the S&P 500 adding 0.29% and the Nasdaq Composite 0.40%.

Amazon (AMZN) shares rose 1.4% and had the biggest impact on the S&P 500 index, while Apple (AAPL) fell 0.65%, affecting the index more than any other stock.

The US dollar declined against a basket of major currencies following the Fed's statements.

The main statements from the Fed's meeting on 16-17 March were as follows:

US central bank interest rates remain in the 0% to 0.25% range until the end of 2021, with officials not expecting an increase until 2023.

The central bank raised its real GDP forecast to 6.5% from 4.2% growth in 2021 (based on the December meeting) amid economic growth and improvements in the labour market.

The Fed also raised its real GDP forecast for 2022 to 3.3% from the previously expected 3.2%.

The Fed also improved its forecast for the unemployment rate, now expected to fall to 4.5% in 2021 from the previous estimate of 5.0%. The FOMC forecast for the unemployment rate in 2022 and 2023 was lowered to 3.9% and 3.5% respectively. The central bank forecasts that inflation will reach 2.4% this year, higher than its previous estimate of 1.8%. The Fed also raised its estimate of core inflation in 2021 to 2.2%, up from its December forecast of 1.8%. Core inflation in 2022 and 2023 is expected to be 2.0% and 2.1% respectively.