The US Federal Reserve and Bank of Japan have kept monetary policy steady at their June meetings as neither country saw the strength or weakness to justify action.
The Fed kept interest rates in its target range of 0.25 to 0.5 per cent. However it did note improvements in the labour market had slowed even as economic growth activity appeared to pick up.
In the statement, the Federal Open Market Committee members said it expected labour market numbers to improve which would lead to “gradual adjustments in the stance of monetary policy”.
However the latest economic projections released by the Fed at the same time showed while the projected path of the federal funds rate is still expected to increase this year to 0.9 per cent, similar to the last projections in March, the longer term projection has fallen from 3.3 per cent to 3 per cent.
The committee added: “Inflation is expected to remain low in the near term, in part because of earlier declines in energy prices, but to rise to 2 per cent over the medium term as the transitory effects of past declines in energy and import prices dissipate and the labour market strengthens further.
Meanwhile the Bank of Japan kept its monetary policy action steady. It kept rates negative at -0.1 per cent and maintained quantiative easing at ¥80trn per year.
In the accompanying statement, the BoJ explained: “With regard to the outlook, although sluggishness is expected to remain in exports and production for the time being, domestic demand is likely to follow an uptrend.
“Thus, Japan’s economy is likely to be on a moderate expanding trend. The year-on-year rate of change in the consumer prices index (CPI) is likely to be slightly negative or about 0 per cent for the time being, due to the effects of the decline in energy prices, and, as the underlying trend in inflation steadily rises, accelerate toward 2 per cent.”
