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Fed Opens Door for Rate Rise, Frets Over Slower Growth

March 19, 2015
The Federal Open Market Committee said in a fresh policy statement that growth had "moderated somewhat" since its January meeting, in part because American households have tailed back spending.

WASHINGTON - The Federal Reserve dropped its pledge to remain "patient" on raising interest rates Wednesday, signaling a possible midyear federal funds rate hike after over six years at the zero level.

But Fed Chair Janet Yellen stressed that policymakers see U.S. economic growth prospects as more muted than they did just three months ago, and will step cautiously as they move out of crisis stance.

That means, as indicated by fresh forecasts from the Fed, that even if it embarks on normalizing monetary policy with a June, July or September rate increase, rates will remain at extraordinarily low levels well into 2016.

But, he added, "The FOMC wants to see further labor market improvement and must still be confident inflation will return to 2% in the medium term to hike rates when the time comes."

The likelihood of a slower rise in rates sent U.S. bond yields and the dollar sinking while stocks jumped.

Down modestly before the FOMC policy statement at 1800 GMT, the Dow Jones Industrial Average finished 1.3% higher, and the broad-based S&P 500 gained 1.2%.

The dollar meanwhile fell past the $1.101 per euro level from $1.064 prior to the policy announcement. Later it hovered around $1.087.

Copyright Agence France-Presse, 2015

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