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| Federal Reserve Raises Benchmark Interest Rate | |
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| Tweet Topic Started: Mar 22 2018, 02:13 PM (60 Views) | |
| Webster | Mar 22 2018, 02:13 PM Post #1 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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![]() ....Wednesday, the Federal Reserve raised the benchmark interest rate as the economy continues to improve; here's how the news went.... (The Guardian) Wall Street makes uncertain start ahead of Fed decision Ahead of the Federal Reserve decision - with rates expected to rise and investors seeking hints about further increases this year - Wall Street has slipped back at the open. With technology stocks still under pressure, both from EU tax plans and the fallout from the Facebook controversy, the Nasdaq Composite has opened down 0.21%. The S&P 500 has dipped 0.09% while the Dow Jones Industrial Average is down 27 points or 0.12%. Neil Wilson, senior market analyst at ETX Capital, said: Markets are pricing in a roughly 90% chance of a hike this week, the first of three or four anticipated this year. So the focus is on the dot plot and the accompanying language from chair Jay Powell. For risk, markets will want the Fed to hold off indicating 4 hikes in 2018 but keep up its confident assessment of the economy. This will in large part depend on how policymakers assess inflationary pressures – if they think inflation is coming they might accelerate the path of rate hikes. But there is a much bigger risk that the Fed sticks to three in 2018 but raises forecasts for 2019 and that could knock equities and give a boost to USD more than indicating four hikes in 2018 might... Since the last meeting in December inflation has picked up but the pace has not really accelerated beyond the most bullish scenarios seen already... Currently the median dot plot suggests three hikes this year, and there is a chance that this could rise to four. However, it is perhaps more likely that the dots show greater confidence in three hikes (i.e., the doves come round to consensus), than the centrists join the hawks and go for four. Nevertheless, with the key doves not voting this year (Neel Kashkari and Charles Evans), it would imply that the actual FOMC dots of voting members is higher... Trade and tariffs will also be a big focus having weighed not insignificantly in the last week. It may be the wrong moment for the Fed to signal more hawkish policy when we look at the potential negative impact of tariffs on GDP. We wait to see whether policymakers comment on the impact of tariffs and a trade war on the economy. |
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| Webster | Mar 22 2018, 02:15 PM Post #2 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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![]() (The Guardian) More signs of strength in the US economy ahead of the Federal Reserve rate decision. Home sales jumped 3% in February to a seasonally adjusted annual rate of 5.54 units, according to the National Association of Realtors. Analysts has expected a rise of just 0.5%. But there is a shortage of available homes which is pushing up prices and helping to price first time buyers out of the market. NAR chief economist Lawrence Yun said sales were uneven across the country but did increase nicely overall: A big jump in existing sales in the South and West last month helped the housing market recover from a two-month sales slump,. The very healthy US economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices – especially in the West – shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar. |
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| Webster | Mar 22 2018, 02:20 PM Post #3 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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(The Guardian) The dollar has dipped ahead of the Federal Reserve meeting, despite the prospect of a rate rise announcement. Connor Campbell, financial analyst at Spreadex, said: In a move that surprised no-one the Dow Jones was incredibly reticent to do much after the bell rang on Wall Street, as investors eye the month’s Fed meeting. The Dow dipped 0.1% this Wednesday; enough of a drop to suggest some pre-Fed fretting, but nothing to really tip its hand as to what it’s are expecting from the March statement. The dollar was more interesting in that regard. The greenback fell half a percent against the pound, 0.4% against the euro and 0.2% the yen, hinting that investors are perhaps a tad worried that Jerome Powell, in his first outing as the central bank’s chief, won’t be as hawkish as they want. Interestingly the questions surrounding the meeting are less about what the Fed will do, but more about how they do it. At this point a rate rise seems almost guaranteed, a move that would take the benchmark interest rate to 1.75%. What is less certain are how many interest rate increases will follow throughout 2018, namely whether Powell will pull the trigger a further 2 or 3 times after his debut hike. |
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| Webster | Mar 22 2018, 02:22 PM Post #4 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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![]() (The Guardian) Tension is mounting, with less than 20 minutes to go until the Federal Reserve decision hits the wires. Most traders expect the Fed to hike borrowing costs today - so the real interest is in how many further hikes are expected. Miles Eakers, Chief Market Analyst at Centtrip, explains: “The Federal Open Market Committee are widely expected to raise the target range for the federal funds rate later today. Last December, the median forecast for the funds rate by year end was 2.1% which implied three hikes. But since then, hawkish rhetoric from the Fed has swayed market expectation towards four rate hikes in 2018. Any confirmation of this will create volatility. |
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| Webster | Mar 22 2018, 02:30 PM Post #5 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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--We're five minutes away from a new Fed policy statement (very likely raising interest rates a quarter-point) and economic projections. Jay Powell (henceforth, JPow) takes the stage for his first news conference half an hour after that. (Neil Irwin, New York Times - 21 March 2018) |
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| Webster | Mar 22 2018, 02:33 PM Post #6 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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(The Guardian) FED HIKES NEWSFLASH: The Federal Reserve has raised US interest rates. The Fed’s Open Market committee has voted to hike the target for the Federal Funds rate, to 1.5% to 1.75% - up from 1.25% to 1.5%. |
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| Webster | Mar 22 2018, 02:33 PM Post #7 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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--Fed raises rates as expected. No dissents. Dot plot suggests two more rate hikes this year. Not three more. (Paul R. laMonica, CNN Money - 21 March 2018) |
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| Webster | Mar 22 2018, 02:35 PM Post #8 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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--Fed summary of economic projections and dot plot for next two years hawkish. Just narrowly averted lifting rate forecast for 2019 to 4 hikes. That will likely now happen at the June meeting. (Joseph Brusuelas, RSM Economists - 21 March 2018) --FOMC dot plot sees three total hikes in 2018, but now sees terminal rate at 3.4% in 2020 as opposed to 3.1%. Slightly more hawkish tilt than Dec17 SEP; basically a wash for $DXY. (Christopher Vechhio, Daily FX - 21 March 2018) |
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| Webster | Mar 22 2018, 02:38 PM Post #9 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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(The Guardian) Fed: The economic outlook has strengthened The Fed has also signalled its confidence in the strength of the US economy. In a statement announcing the rate hike, it says: Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low. It has then added a new line, declaring: The economic outlook has strengthened in recent months. |
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| Webster | Mar 22 2018, 02:43 PM Post #10 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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![]() (The Guardian) What the dot plot tells us Here’s the latest ‘dot plot’ from the Federal Reserve’s policymakers, showing where they expect interest rates to be at the end of 2018. Today’s guesstimates are in the right-hand column, next to the ones from December’s meeting. As you can see, the majority expect rates to have risen to 2.25% - ie, two more hikes on top of today’s one. But, there has been an upward movement among the dots, compared to three months ago, suggesting the Fed is a little more hawkish. |
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| Webster | Mar 22 2018, 02:45 PM Post #11 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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![]() --New Fed dot plot shows median still for 3 rate hikes this year, but more (7/15) officials now favor 4 or more hikes this year. And dots become much more dispersed through 2020 than before. (Nell Henderson, Wall Street Journal - 21 March 2018) |
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| Webster | Mar 22 2018, 02:47 PM Post #12 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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(The Guardian) Fed hikes: What the experts say Nancy Curtin, chief investment officer at Close Brothers Asset Management, says today’s rate hike was a “fairly straightforward decision”: The US economy seems to be in somewhat of a sweet spot, with a synchronised global economy, a weaker dollar, fiscal expansion and the prospect of increased business investment all supportive of growth. Wholesale tax reform should filter through more strongly into the economic data ahead, providing increased growth momentum. At the same time, inflation is showing signs of getting close to the Fed’s goal, and spare capacity in the labour market is declining. Michael Pearce of Capital Economics says the Federal Reserve is signalling that rates will rise faster than expected in the next 21 months. The Fed’s decision to raise interest rates by 25bp today was widely expected but some investors may have been caught off-guard by the degree to which Fed officials increased their projections for future interest rate hikes. The median projection for the fed funds rate at the end of 2019 is now 2.75-3.00% - exactly in line with our own forecast, which until recently was at the hawkish end of the spectrum. Today’s decision to raise the federal funds rate to 1.50% – 1.75% was unanimous; the two dissenters at the December meeting, Charles Evans and Neel Kashkari, are not voting FOMC members this year and their replacements are more hawkish. Aaron Anderson, Senior Vice President of Research, Fisher Investments, comments: The Fed’s more hawkish tone could simply be a result of new Chairman Powell’s communication style compared to Janet Yellen, or it could mean the Fed believes recent economic data signal a strengthening economy, tighter labor market, and higher inflation. But if a few data points since the last meeting were enough to change the Fed’s plans, they could change just as easily in the future.” |
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| Webster | Mar 22 2018, 02:51 PM Post #13 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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(The Guardian) Jerome Powell's press conference begins The new Federal Reserve chair, Jerome Powell, has arrived for his first press conference since succeeding Janet Yellen. He confirms that the Federal Open Market Committee voted to raise US interest rates today. He calls it another another step in the process of gradually scaling back accommodative monetary policy. Powell says the economic outlook has strengthened in recent months, and that the FOMC expects the jobs market to remain strong. On the outlook, he says the Fed will be watching how the economy performs in the months and years ahead. |
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| Webster | Mar 22 2018, 02:53 PM Post #14 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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(The Guardian) We’re swiftly onto questions.... --Q: The Fed has raised its growth forecasts, and sees unemployment lower than before, but hasn’t changed its forecast for inflation much. Why? Jerome Powell says the US unemployment rate has fallen from 10% during the crisis to just 4.1% today, but with only very gradual pressure on inflation. That suggests the relationship between changes in labor market slack and inflation isn’t very tight. So the Fed is trying to take the middle ground, by making gradual changes to the Federal Funds rate. --Q: How concerned would you be if US inflation rose over your 2% target? Powell says the Fed would be concerned about “sustained deviation” above or below its target. |
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| Webster | Mar 22 2018, 03:14 PM Post #15 |
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Wasatch Storyteller & Resident Forum Curmudgeon
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--Jerome Powell: "We decided today to raise the target rate for the federal funds rate by 1/4 percentage point, bringing it [from] 1.5% to 1.75%. This decision marks another step in the ongoing process of gradually scaling back monetary policy accommodation" (Fox Business, 21 March 2018) -Read more: https://www.foxbusiness.com/markets/powell-fields-questions-on-yield-curve-and-jobs |
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