* Fed statement seen dovish, affirms "lower for longer"
* Fed slashes U.S. growth forecast
* BoE minutes reduce rate-hike bets
(Recasts with Fed decision, changes byline, updates prices,
By Gertrude Chavez-Dreyfuss
NEW YORK, June 18 The dollar retreated against
the euro and the yen on Wednesday as the Federal Reserve struck
a dovish tone in its post-meeting statement, slashing its
forecast for economic growth and suggesting long-term rates
could be lower than previously indicated.
Investors were expecting the Fed to upgrade its assessment
of the U.S. economy in the wake of some better-than-expected
numbers following weather-driven struggles in the first quarter.
That didn't happen though as the Fed cut its forecast for
U.S. economic growth to a range of between 2.1 percent and 2.3
percent for 2014 from an earlier forecast of around 2.9 percent
"The statement was largely dovish." said Mark McCormick,
currency strategist at Credit Agricole in New York. "People were
expecting the Fed to acknowledge the firmer inflation prints and
the drop in the unemployment rate."
The Fed, as expected, reduced its monthly asset purchases
from $45 billion to $35 billion a month, divided between $20
billion of Treasury securities and $15 billion of
In afternoon trading, the dollar was down slightly against
the yen at 102.12 yen, while the euro was up 0.1 percent
versus the greenback at $1.3562.
Prices in the futures market were consistent with the view
that the Fed will start raising rates by the middle of next
More importantly, the Fed lowered its projections for
long-term interest rates. The median projection was for a
long-term federal funds rate of around 3.75 percent, compared to
4 percent in March.
"The bond market had largely priced this in via the spring
bond rally," said Anthony Valeri, investment strategist, at LPL
Financial in san Diego.
"Offsetting the drop in the long-term fed funds rate was an
increase in short-term rate hike expectations. On balance, this
should slightly reinforce the lower for longer theme."
BOE SETS THE TABLE
Earlier, the Bank of England released minutes from its June
4-5 meeting, which showed members wanted to see more evidence of
economic slack being absorbed before raising rates. That news
weakened the pound against the dollar and the euro.
The tone of recent comments by policymakers, including BOE
Governor Mark Carney last Thursday, had bolstered expectations
that one of the committee members may have voted for an increase
earlier this month.
Sterling last traded up 0.1 percent at $1.6974,
while the euro gained 0.1 percent against the pound
to 79.94 pence.
(Additional reporting by Richard Leong; Editing by Chizu