This is peak investing: Stocks, bonds and concerns are up
- Author: Zachary Reyes Jun 15, 2017,
Jun 15, 2017, 13:09
The Fed now sees the unemployment rate ending the year at 4.3 percent, where it sits currently, rather than the 4.5 percent previously expected.
Economic data released before the open didn't do anything to strengthen the argument for more rate hikes. Most analysts believe the Fed will raise the federal funds rate - what banks charge each other for short-term loans - for the second time this year.
Chair Janet Yellen was asked at a news conference whether she anxious that the Fed could rattle markets once it starts shrinking its bond holdings.
Kashkari, who has been tipped as a potential successor to current chair Janet Yellen, has consistently warned against raising rates, fearing that it might harm the recovery. The latest move - the second this year - takes the target range for the fed funds rate to 1.00-1.25%.
The Fed also put out a statement about its plans to unwind its enormous bond portfolio, bought as part of its bid to restart the USA economy after the 2007-09 recession.
The U.S. dollar bounced back from seven-month low against a basket of currencies after the Federal Reserve raised interest rates and gave a first clear outline on its plan to reduce its $4.2-trillion portfolio of bonds. After three rounds of so-called quantitative easing the Fed acquired $4.5tn worth of bonds, including $1.8tn in mortgage securities. Starting sometime this year, Yellen says the Fed will start gradually reducing those holdings by as much as $600 billion a year.
That has some contrarians anxious about what will happen as the Federal Reserve continues raising interest rates and talks about paring back its bond investments. "Household spending has picked up in recent months, and business fixed investment has continued to expand". They generally expect the Fed to begin the process at a mid-September policy meeting. Before becoming president, he often criticized both the Fed and Yellen.
The Federal Reserve raised interest rates on Wednesday.
"But this could be the last hike for a while".
"The committee now expects to begin implementing a balance sheet normalisation program this year, provided that the economy evolves broadly as anticipated". Inflation was viewed as having "declined recently" while the core measure is running "somewhat below 2 percent", but expected to stabilize near the target over the medium-term.
Retail sales fell 0.3 percent last month - the largest fall since January 2016 and way below economists' expectations for a 0.1 percent gain. "Increases in the interest rates were fine". "If they're right and the economy is strengthening a little bit, then another rate hike is the thing to do".
Data showed that New Zealand's economy grew 0.5 percent in the three months to March, lower than the 0.7 percent growth forecast in a Reuters poll and well below the central bank's forecast for 0.9 percent growth.