Finance

Fed Raises Rates, Unveils Balance Sheet Cuts In Sign Of Confidence

Fed Raises Rates, Unveils Balance Sheet Cuts In Sign Of Confidence

"In view of realised and expected labour market conditions and inflation, the FOMC (Federal Open Market Committee) chose to raise the target range for the federal funds rate to 1 to 1.25 per cent", the American central bank said in a statement after concluding its two-day monetary policy meeting.

A Reuters poll of 21 of the 23 primary dealers that do business directly with the Fed showed 14 of them now believed it would announce the start of its balance sheet normalisation at its September 19-20 policy meeting.

KEEPING SCORE: Japan's Nikkei 225 stock index fell 0.2 percent to 19,838.86 and South Korea's Kospi sank 0.6 percent to 2,358.66.

"Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely", the Federal Open Market Committee said in a statement Wednesday. The process could start "relatively soon", Fed Chair Janet Yellen said.

"They have taken a cautious approach to balance sheet normalisation, but they have begun it and it's definitely a tightening of policy".

He advising savvy investors to stick with stocks and stay away from bonds as the Federal Reserve steps harder on the accelerator by continuing to raise interest rates.

Although the rate hike was widely expected, market participants had feared that a recent slowdown in economic activity would dampened expectations of a total three rate hikes in 2017.

Trump Denounces Reports Of Widening Russia Probe
North Carolina Republican Richard Burr and Virginia Democrat Mark Warner aren't providing any other details regarding the meeting. Mueller has not publicly discussed his investigation, and a spokesman for the special counsel declined to comment.

Now the Fed said the inflation will be below its 2 percent target.

But the New Zealand dollar skidded 0.8 percent to $0.7213, moving away from the previous session's four-month high of $0.7319.

Eurozone government bond yields rose, reflecting post-Fed moves in U.S. treasuries, whose yields had earlier fallen after weaker than forecast inflation and retail sales data triggered alarm about the underlying health of the USA economy. The Federal Reserve has raised its key inte. As far as interest rates are concerned, the median forecast was for one further rate increase by the end of 2017. The government has achieved all its goals - unemployment is below 5 percent, inflation is about 2 percent, economic growth is about 1-2 percent.

The pound was down 0.2% at 1.27 USA dollars as the greenback was boosted by Wednesday evening's rate rise, but sterling rose 0.1% against the euro.

At the same time, the world's most important central bank also normalized money printing - a policy instrument that nearly a decade ago was introduced as an extraordinary, emergency, one-off response to the huge credit crunch that threatened to engulf the world economy.

So you get the picture: central banks are on the whole turning hawkish, which in theory should be negative news for the equity markets which had been supported until now by low rates and QE.

Data released overnight showed United States consumer prices fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand and weakening sentiment.


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