While you were sleeping: UPDATED Stocks rise as lowers rate rise prospects

US stocks rose and Treasury yields fell after Federal Reserve officials suggested interest rates could rise less this year than they previously expected.

The Fed held interest rates steady, as expected. More importantly, investors said, officials now expect the federal-funds rate to rise to 0.875% by year end, implying two interest-rate increases, a sign that global economic uncertainty has made them more cautious about the path of U.S. monetary policy.

The move now means that the Fed’s expectations and investors’ expectations for interest rates are more closely aligned.

"The centre of the committee will likely recognise that the data do not suggest any material slowdown in the US economy and that financial markets have stabilised, at least for now," with New York-based Cornerstone Macro analyst Roberto Perli told Reuters.

"The best course of action in this situation is to leave rate hikes on the table at the next couple of meetings," he says.

The latest US inflation data revealed a larger than expected gain. A Labor Department report showed the consumer price index, excluding food and energy, rose 0.3% in February, following after a similar increase in January.

"The Fed could easily signal that rate hikes are coming, possibly sooner than most think," Pennsylvania-based Naroff Economic Advisors chief economist Joel Naroff told Reuters.

"Today's numbers, especially the inflation report, is a warning that the days of no price pressures are behind us."

A Commerce Department report showed housing starts climbed 5.2% to a seasonally adjusted annual pace of 1.18 million units in February, a five-month high.

Dow rises 74 points
On Wall Street, the Dow Jones Industrial Average rose 74.51 points, or 0.4%, to 17,326.04, while the Nasdaq Composite Index increased 0.75% to 4763.97 and the Standard & Poor's 500 Index lifted 0.6% to 2027.22.

The 10-year Treasury yield is at 1.938% versus 1.995% before the Fed statement. The policy-sensitive two-year yield is 0.871% versus 0.989% beforehand.

In Europe, the Stoxx 600 Index ended the day with a gain of nearly 0.1% from the previous close. Germany's DAX Index added 0.5%, while the UK's FTSE 100 Index rose 0.6% and France's CAC 40 Index fell 0.2%.

Oil prices rallied after major oil producers geared up for a meeting in Qatar next month to discuss plans to freeze production. US crude surged 5.8% to $US38.46 a barrel. 

Qatari Oil Minister Mohammed Bin Saleh Al-Sada says producers from within and outside the Organisation of the Petroleum Exporting Countries (Opec) will meet in Doha on April 17 to discuss output freeze plans, according to Reuters.

(BusinessDesk)