Gold holds near 4-month low as Fed stance hoists dollar

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US Fed defies Trump and holds interest rates

But for now, the Fed chief said, low inflation allows the central bank to be "patient" in deciding on any further changes to its overnight benchmark lending rate, which it left in a range of 2.25 percent to 2.50 percent on Wednesday.

The central bank's preferred inflation measure is sitting at 1.6 percent.

The US Federal Reserve has kept interest rates on hold despite pressure from President Donald Trump to announce a cut.

The central bank's statement contained no major surprises.

Tuesday, Trump took to Twitter to pressure the Fed to cut interest rates by a full percentage point and return to the crisis-era bond-buying programme known as quantitative easing or QE. Officials slightly upgraded their assessment of the economy, saying "economic activity rose at a solid rate" while "the labor market remains strong".

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After a two-day meeting the Fed made a decision to hold rates steady at a range between 2.25% and 2.5%.

Diane Swonk, chief economist at Grant Thornton, said much of the blame for the financial market turmoil and economic slowdown past year "may be traced to the administration's own threats of a full-blown trade war with China".

"If we did see inflation running persistently below (the target), that is something that we would be concerned about and something that we would take into account in setting policy", he said.

But NAB's Ray Attrill believes the local currency might fall under 70 United States cents "were the RBA [Reserve Bank] to cut rates next week". That meant the central bank can afford to be data dependent as it assesses "what, if any, further adjustments in our policy stance might be required to maintain our dual-mandate objectives", he said.

"The best that Powell can do is to stay the course and keep his noise-cancelling headphones charged to focus on where we are economically, not politically".

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It said growth would slip back to 0.2% in the second quarter as businesses waited for the outcome of Brexit talks with the EU. Consumer spending is holding up well, however, according to the Bank, despite easing conditions in the property market.

Few expected the Fed to make a move on interest rates with United States unemployment hovering at a 50-year low, financial markets on stronger footing and data last week showing that the USA economy grew at a stronger than anticipated 3.2 percent during the first three months of this year.

"We have the potential to go up like a rocket if we did some lowering of rates, like one point, and some quantitative easing", Trump wrote on Twitter. "We don't think about short term political considerations we don't discuss them, and we don't consider them in making our decisions, one way or the other".

The Fed raised interest rates four times in 2018 and nine times since December 2015.

The Fed decision lifted US Treasury yields to a one-week high, while the dollar looked set to end the week on a firmer note as markets scaled back bets on a USA rate cut.

As with recent economic data, the Fed's assessment of conditions had something for both hawks and doves.

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