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The US central bank remained optimistic on the economy after the interest rates were left unchanged during its first meeting since President Donald Trump took office.    

The Federal Reserve vote unanimously to keep interest rates in a range of 0.5% to 0.75%.  

"Measures of consumer and business sentiment have improved of late," according to the central bank also.

The policymakers had raised interest rates by 0.25% in December, marking its second increase in over a decade.     

President Trump pledges to boost growth  through tax cuts, spending and deregulation, which led to heightened expectations of higher inflation.

With the economy near full employment, Fed chairwoman Janet Yellen warned last month that the central bank had risked a “nasty surprise” on inflation if there is a gradual increase in the rates.

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Meanwhile, the Fed said on Wednesday that inflation "will rise to 2% over the medium term", but declined to comment over the effect of the Trump administration’s plans.

According to the central bank, the Federal Open Markets Committee (FOMC) would likely make “gradual increases” despite being upbeat.

However, it did not comment on any update of the next rate hike, citing investors were closely watching for signals on when the next rise would be and how many were planned for this year.

"Inflation increased in recent quarters but is still below the committee's 2 per cent longer-run objective," it said in the statement overnight. 

"Market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance."

Yellen Gives Details on the Next Move

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Ahead of the Federal Reserve’s few clues into the timing of the next move, chairwoman Janet Yellen signaled this month that "waiting too long" for a rate hike risked "a nasty surprise down the road - either too much inflation, financial instability, or both."

Further, the statement provided "a very small nudge towards the next rate hike" said chief economist Ian Shepherdson.

Conclusion

Given more than a week of Trump’s administration, investors are now experiencing a volatility in the money and bond markets. However, this is only considered as the early innings of the fiscal policy as investors are still looking ahead in terms of U.S. Treasury volatility.

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