The United States Federal Reserve sent the US dollar tumbling with a surprisingly dovish forecast for growth and interest rates, even as it took a solid step towards a midyear rate increase.
Sharemarkets rose in the US as the Fed indicated rates would rise much slower over the next two years than forecast in December.
The Federal Reserve has dropped its pledge to remain ''patient'' on raising interest rates, signalling a possible mid-year Fed funds rate rise after more than six years at zero.
The dropping of the key word from its policy statement yesterday at the end of a two-day meeting was a significant step away from its crisis-based monetary policy since 2008.
But a still cautious Fed noted US economic growth had ''moderated somewhat'' since January and the central bank reduced its growth forecast for this year by 0.3% to 2.3% to 2.7%.
US treasury 10-year yields fell below 2% for the first time since March 2 and the euro rose against the US dollar.
The Federal Open Market Committee, the Fed's policy arm, repeated its view of job market conditions having improved.
While the statement put a June rate increase on the table, it also allowed the Fed enough flexibility to move later in the year, stressing any decision would depend on incoming data, Craigs Investment Partners broker Chris Timms said.
Although the jobs market appeared to continue to strengthen, inflation was still weak, the housing sector was slow and export growth had slowed.
Despite the change in the language, the policy body stressed it would not rush into a rate increase immediately, he said.
''The committee judges an increase in the target range for the federal funds rate remains unlikely at the April FOMC meeting,'' the FOMC said.
''The committee anticipates it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labour market and is reasonably confident that inflation will move back to its 2% objective over the medium term.''
Mr Timms said a rate increase seemed unlikely next month and the change in guidance did not mean the bank had decided on the timing of a rate increase.
''While the Fed showed it's nearing a hike, fresh forecasts from the central bank revealed a more cautious view of the economic outlook.''
