Still on course: Fed signals one more rate hike in 2017

Still on course: Fed signals one more rate hike in 2017

It would start with reductions of $10 billion a month - $6 billion in Treasurys and $4 billion in mortgage bonds - and raise the amount quarterly until it reached $50 billion a year later. How will it affect market interest rates, and the US dollar? The bank also lowered its long-run target to 2.8%, the first time it's fallen below 3%.

The Fed expanded its bond holdings - the major assets on its balance sheet - in the years after the financial crisis erupted in 2008.

It believes its strategy to do so gradually, according to a fixed schedule and slowly increasing the amounts, and signalled very clearly and well in advance to the financial markets, will allow for a smooth process with minimal market volatility.

If balance sheet expansion led to asset price inflation [bearish for gold], balance sheet taper could lead to asset price deflation [positive for gold]. Almost nine years later Fed officials believe the economy is strong enough to stand more on its own.

Beyond her own views on the economy, inflation and the Fed's balance sheet, Yellen might decide to drop a hint in her news conference about an even more tantalizing topic: Her own future. Yellen's four-year term as chair will end on February 3. In August, the US jobless rate was 4.4 percent, just above the 16-year low it touched in May and July.

Several times Yellen referred to doggedly low inflation as a "mystery", but the Fed stuck to its tried-and-true forecast that it will eventually rise to 2%.

CMC Markets analyst Michael Hewson said: "There's been a great deal of anticipation about this week's Federal Reserve rate meeting particularly since the FOMC looks set to pull the trigger on the beginning of the paring down of its $4.5trn balance sheet".

Amid an otherwise modest equity market response to the Fed's latest policy announcement, the move up in bank stocks stood out and tracked closely a climb in yields on U.S. Treasury securities.

Its size reflects bond purchases the Fed made after the crisis struck to try to ease long-term borrowing rates, encourage spending and energize an anemic economy.

And the nominal excuse for the Fed to hold the line on further rates hikes for the time being - the series of hurricanes that have battered the southern United States and seriously disrupted economic activity - may have bought the Fed some useful time.

Yellen declined to say at a news conference whether she would like to serve a second term.

One of the more interesting moves was in USD/JPY, where the greenback has gone on a significant tear after ripping out of the range it was capped in at 111.

Yellen can expect to be asked, again, about whether she's discussed her future with President Donald Trump, after it emerged that she had breakfast with his daughter Ivanka in July.

South African bonds were marginally weaker at midday on Tuesday as the market remained focused on the Reserve Bank's interest rate decision on Thursday, and the release of consumer inflation data on Wednesday.

The other policy decision on Yellen's agenda involves the Fed's so-called balance sheet.

But the Fed has yet to achieve its other objective of stabilizing prices at a 2 percent annual rate. One vacancy about to open is the seat of Vice Chairman Stanley Fischer, who is stepping down next month.



Related Posts

Osun State Commissioner Beaten Mercilessly In Ondo State
He described the incident as regrettable, urging Ilori to shun violence and thuggery. Delegates from Ondo State at the public hearing booed Ilori during his presentation.

Bihar Teacher Eligibility Test 2017 results declared, here's everything about it
Soon your result will appear on the screen download and take out the printout for the future reference. All in all, mere 20% qualified the Bihar TET 2017, cites report .

Bed Bath & Beyond Inc. (BBBY) Issues Earnings Results
Investment Advisors LP lifted its stake in Bed Bath & Beyond by 25.8% in the 2nd quarter. (NASDAQ: BBBY ) for 2,300 shares. Finally, Ameritas Investment Partners Inc. bought a new stake in Bed Bath & Beyond in the first quarter worth $146,000.

"Gagner un cinquième Tour reste ma priorité" — Chris Froome
Alberto Contador. À défaut d'intégrer le club des six, Chris Froome mérite le prix de la sportivité. Christopher Froome confirme alors sa suprématie sur les Grands Tours.

MCI scam: CBI arrests ex Orissa HC judge IM Quddusi
At this point, according to CBI, Quddusi and Pandey "assured to get the matter settled" through their contacts. According to sources in the CBI, they will be produced before the Designated Court in Delhi later in the day.

Rio to return Coal & Allied proceeds to shareholders
Rio's Australian shares rose 1.4 percent on Friday, outpacing gains in rival BHP Billiton. Rio intends to complete the $700 million off-market component by the end of this year.

Toys "R" Us is accepting applications for holiday positions
The Ontario Supreme Court has made the decision to grant Toys "R" Us Canada creditor protection. This is extremely important for the company as a whole because of the upcoming holiday season.

UK police arrest three in Wales over London train bomb attack
They have recently helped refugees from conflict zones including Syria and Iraq. "This has come as a big shock to them". A local shopkeeper, who didn't want to be named, said the 21-year-old "came here shopping every once in while".

WisdomTree Japan Hedged Financials ETF (DXJF) Rises 1.04% for Sep 20
WisdomTree SmallCap Earnings Fund (EES) shares are seeing solid buying inflow as the Chaikin Money Index is holding above zero. SAR stands for stop and reverse and it is a trend following indicator, created to identify the turning point in price action.

Trump says giving Mideast peace 'an absolute go'
The president says the US can't abide by an agreement if Iran continues destabilizing activities. It wasn't clear if Trump had made a final decision to leave or stick with the Iran deal.

© 2015 ExpressNewsline. All Rights reserved.