World
US Federal Reserve keeps interest rates unchanged
Washington : The US Federal Reserve kept its benchmark short-term interest rates unchanged amid potential risks to the US economy, signalling the central bank will slow the pace of future interest rate hikes this year.
 
In a statement released on Wednesday after a two-day policy meeting, the Fed said US "economic activity has been expanding at a moderate pace despite global economic and financial developments in recent months," but these developments continue to pose risks, Xinhua news agency reported.
 
In December, the Fed raised its target range for the federal funds rate by 25 basis points to 0.25-0.5 percent, the first rate hike in nearly a decade, marking the end of an era of extraordinary easing monetary policy.
 
But the turmoil in financial markets and a slowdown in global economy since the start of the year has raised increasing concerns about the strength of the US economy, forcing Fed policymakers to hold off on any further rate hikes since then.
 
In its January policy statement, the Fed declined to make a judgement about the balance of risks to the US economy, an indication of the uncertainty about the impact of global economic and financial turbulence on the world's largest economy.
 
The changes in the statement on risks signaled that Fed officials are inclined to wait for more time to assess the US economic outlook before raising interest rates again.
 
"We should not take the strength in the US labor market and consumption for granted," Fed governor Lael Brainard said in a speech earlier this month. "From a risk-management perspective, this argues for patience as the outlook becomes clearer."
 
The Fed's updated projections released on Wednesday showed that policymakers expected the federal funds rate to rise to around 0.9 percent at the end of 2016, implying two quarter-percentage-point rate increases this year, down from four estimated in December.
 
"Most participants do continue to envision that if economic developments unfold as they expect that further increases in the federal funds rate will prove appropriate over time," Fed Chair Janet Yellen said on Wednesday at a press conference after the policy meeting, indicating the central bank is still on track to raise interest rates later this year.
 
As the US economy approaches full employment, wage pressures are expected to start rising and pushing up inflation towards the central bank's 2 percent target, according to Fed officials. This gives the central bank reasons to consider raising interest rates to prevent the economy from overheating.
 
The US unemployment rate held steady at 4.9 percent in February, near the level many Fed officials believe represents full employment.
 
The economy added 242,000 new jobs last month, more than twice the minimum amount of monthly job growth needed to stabilize the unemployment rate, according to the Labor Department.
 
The so-called core PCE (personal consumption expenditures) price index, a Fed's preferred measure of core inflation excluding food and energy, increased 1.7 percent in January from a year ago, the biggest year-on-year gain since the end of 2012.
 
Stanley Fischer, vice chairman of the Fed, said earlier this month that the US may be seeing "the first stirrings of an increase in the inflation rate", suggesting he may be willing to raise interest rates in coming months.
 
"They need to find employment growth to start slowing down, because if it doesn't start slowing down, they're going to be behind the curve," Joseph Gagnon, a former Fed economist and a senior fellow at the Peterson Institute for International Economics, told Xinhua.
 
"That (the employment growth) has been strong. That's why they have to raise interest rates," Gagnon said, predicting that the central bank could hike interest rates as soon as its next policy meeting in April.
 
But about 76 percent of the business and academic economists polled by the Wall Street Journal this month estimated that the Fed would wait until June to raise interest rates.
 
The central bank's baseline expectations for US economic activity, the labor market and inflation "have not changed much since December," Yellen said, adding that "economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate." 
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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'Rs.2,500 air ticket to dramatically change India's civil aviation'
Hyderabad : Air ticket at Rs.2,500 for 500 km travel proposed in the draft civil aviation policy will be a game changer for the sector with India expected to add 50 new airports every year, Civil Aviation Secretary R. N. Choubey said on Wednesday.
 
He believes the 350 million strong middle class offer an opportunity for 500 percent growth against the existing 20 percent growth.
 
Talking to reporters at India Aviation 2016 here, he said the process for implementation of plans for regional connectivity and affordable air tickets would be set in motion once the civil aviation policy is announced next month.
 
Stating that 350 airstrips built since World War II and scattered all over the country are a goldmine for India, the official said 50 of them will be developed in no-frill airports every year for the next three to four years.
 
Choubey said for the airlines connecting an unserved airport with the served airport, the government proposed to offer several concessions like no landing parking charges, no excise duty, no Value Added Tax (VAT) and no central tax.
 
As even these concessions may not bring down price to tipping point of Rs.2,500 for 500 km travel, the government will provide Viability Gap Funding (VGF).
 
Choubey said the issue came up for deliberations earlier in the day, where all aircraft manufacturers were present. He said all the firms believe that India is the country to go as it has 350 million middle class whose purchasing power parity is equal to European countries.
 
He pointed out that currently 70 million were flying. "It means that on an average a middle class Indian travels once in five years. This figure is shocking. In purchasing power parity terms it is not as if average middle class India can't buy air ticket once a year for Rs.2,500," he said.
 
The official said this was not happening because the people have to drive six hours from their place of stay to catch a flight and also the fares are not affordable. "If one has to pay Rs.5,000-Rs.5,500 for 500 km, this will not happen," he added.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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