June 18 - Despite some new evidence of inflation, the Fed kept its statement little changed and gave no new indications of when it would raise interest rates, sending stocks to new record highs. Bobbi Rebell reports.
A careful Fed Chair Janet Yellen held the line at the press conference following the Federal Reserve policymakers' two-day meeting. Making it clear- she is not defining when a rate hike will come: SOUNDBITE: JANET YELLEN, CHAIR, U.S. FEDERAL RESERVE (ENGLISH) SAYING: "There is no mechanical formula for what a considerable time means. The answer is it depends. It depends on how the economy progresses." The Fed cut this year's forecast for U.S. economic growth to between 2.1 and 2.3 percent- from 2.9 percent- but kept forecasts for the next two years unchanged. She also indicated she didn't consider stocks overvalued - pushing the S&P 500 to a new record high. SOUNDBITE: JANET YELLEN, CHAIR, U.S. FEDERAL RESERVE (ENGLISH) SAYING: "The committee doesn't try to gauge what is the right level of equity prices, but we do certainly monitor a number of different metrics that give us a feeling for where valuations are relative to things like earnings or dividends. And look at where these metrics stand in comparison with previous history, to get a sense of whether or not we are moving to valuation levels that are outside of historical norms, and I still don't see that. I still don't see that for equity prices broadly." U.S. treasuries moved higher- and yields lower- as markets took her words as a more dovish stance on monetary policy. Recent data has shown inflation pressure rising modestly. But Yellen called the recent data "noisy" and said inflation was evolving in line with expectations. LPL Financial's John Canally: SOUNDBITE: JOHN CANALLY, ECONOMIC STRATEGIST, LPL FINANCIAL (ENGLISH) SAYING: "They are kind of in a tough spot here. We've had a pretty big uptick in inflation in the last couple of months. The inflation rate in January was 1.1 percent. In May, it was 2.1 percent. So you could say that the inflation rate has doubled, and yet the Fed is continuing with its easy policy." As expected, the Fed cut their bond buying program by another $10 billion - indicating confidence the economy continues to recover. They hinted at slightly higher interest rates- but suggested that in the long run rates would be lower than previous indications. The Fed is also continuing to keep an eye on financial stability: Moody's Analytics Ryan Sweet: SOUNDBITE: RYAN SWEET, SENIOR ECONOMIST, MOODY'S ANALYTICS (ENGLISH) SAYING: "Yellen came out and said that volatility may be too low and we agree. Bond market volatility is very low. Stock market volatility is very low. So any sudden spike in volatility could cause interest rates to rise very sharply." The Fed also said unemployment remained elevated, despite recent job growth.