Investors believe the Federal Reserve is on track to raise rates in June, after keeping them on hold at between 0.75% to 1% in May.
The Federal Reserve, led by chair Janet Yellen, said it viewed the slowdown in US GDP growth to 0.7% in Q1 "as likely to be transitory", raising investor expectations for a rate increase next month.
It continues to expect that, with gradual adjustments in the stance of monetary policy, "economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilise around 2% over the medium term".
Where now for the Fed as political interest will play out immensely?
The Fed noted the employment market continues to strengthen "even as growth in economic activity slowed", adding: "Household spending rose only modestly, but the fundamentals underpinning the continued growth of consumption remained solid."
According to The Financial Times, there is now a 94% chance of a rate increase at the June meeting, according to Fed fund futures, up from 67% before this month's decision.
The Fed raised rates by a quarter point in March and said it expected two more increases in 2017.
Aberdeen Asset Management investment strategist Luke Bartholomew commented: "Obviously there was no hike, but no-one was expecting there would be. What is interesting is how dismissive the Fed is of recent economic weakness, saying it is temporary and the fundamentals remain strong. The outlook for interest rates really depend on whether that judgement is correct.
"They have not given much away about whether they will hike in June, so they will probably use speeches closer to the June meeting to signal their intentions and investors will pore over them for clues."
Antoine Lesné, EMEA head of ETF strategy at SPDR ETFs, part of State Street Global Advisors, added: "Comments from the committee members and economic data will be key to nail the second rate hike of 2017, which is expected to happen at the next meeting in mid-June.
"However, it may happen amid a heavy European political agenda and following negotiations around the expected US tax cut plan. So it may still be too early to predict a hike.
"Also, if high levels of US equities are being watched by investors, then any potential drop could potentially influence the Fed's action too.
"In the meantime, we see investors going with this tightening mood and favouring exposures benefitting from a hike such as floating rate notes. Convertible bonds have also proven to do relatively well in such tightening periods."
