FOMC: Stimulus won’t spark inflation

The dollar rose as Federal Reserve policy makers said continued stimulus to push unemployment lower doesn’t risk sparking an undesirable jump in the inflation rate.

The U.S. currency strengthened as the Federal Open Market Committee said it doesn’t “face a trade-off between its employment and inflation objectives, and an expansion of aggregate demand would result in further progress relative to both objectives,” according to minutes of their April 29-30 meeting released in Washington. The greenback strengthened earlier rose as Treasury yields increased from almost six-month lows.

“Hawkishness from the Fed will come in the form of acknowledgment that there’s a marked improvement in job creation,” Omer Esiner, chief market analyst in Washington at Commonwealth Foreign Exchange Inc., a currency brokerage, said in a telephone interview before the minutes’ release. “I don’t think it’s not going to get any alarm bells ringing about the imminent hike in interest rates, but it’s certainly sounds a bit more hawkish than many expected.”

The Bloomberg Dollar Spot Index rose 0.2 percent to 1,011.10 as of 2:04 p.m. New York time.

New York Fed President William Dudley told the New York Association for Business Economics yesterday that the pace of eventual interest-rate rate increases “will probably be relatively slow,” depending on the economy’s progress and financial markets.

The Fed reiterated in a statement after the April 30 policy meeting last month it will keep the key rate target near zero for a “considerable time” once it concludes the bond-purchase program it has also used to fuel growth.

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