Fed raises rates, gives details on balance sheet reduction

This makes no sense at all and likely will have to be revised in September, by which point it might be just 4.0%, well below the Fed's 4.6% Nairu [non-accelerating inflation rate of unemployment] estimate, down 0.1pp from March. It gave no hint of when that might occur. Those figures would rise in increments over a year until they reached $30 billion a month in Treasurys and $20 billion in mortgage bonds. For reference, borrowers and savers saw interest rates of almost 20% in June 1981. Following that news, the probability that the June hike would be followed by another increase this year dropped to about 28 percent from 48 percent, according to pricing in fed funds futures contracts. But as interest rates increase, investors demand higher yields from REIT shares, an adjustment that comes in the form of lower share prices. Recent data have suggested that inflation may even be slowing further.

"A return to a positive term premium of 50bp-100bp as the QE programme is unwound would see long-term USA bond yields normalise at 4%-5% given our estimates of the equilibrium Fed Funds rate", it said. Trump said his program would double growth to 4 percent or better, though the administration based its first budget plan on achieving a lower but still highly ambitious goal of 3 percent annual growth.

The S&P 500 was down 1.67 points, or 0.07 percent, at 2,438.68 and the Nasdaq Composite was up 3.90 points, or 0.06 percent, at 6,224.27.Five of the 11 major S&P sectors were lower, with energy declining 2.2 percent as oil prices tumbled after data showed a surprise build in USA inventories. There was only one rate increase in both 2015 and 2016.

The meeting minutes from the Fed's March rate decision first mentioned the prospect of gradual balance sheet reduction.

Market volatility has been well contained thus far, but is expected to pick up when fixed income dealers knows when the Fed will begin the process of reducing its balance sheet, the pace and the likely size of the balance sheet at the end. The Fed traditionally carried smaller sums with operations generally relegated to short-dated securities: But when the Financial Collapse hit, and when interest rates were pegged to the theoretical floor - the Fed needed to find another way to drive liquidity into markets, and buying bonds was a novel way of doing so.

Inflation across the US dropped by 0.1 percent last month after having risen by 0.2 percent in April.

Mortgages and auto loans are not directly affected by the actions of the Fed, but historically speaking, they tend to rise after the Fed raises rates.

Uncertainty also surrounds the membership of the Fed's own policy committee.

Some news reports have mentioned leading candidates to fill the vacancies.

Watch Service' Robert Jones, chief executive of Old National Bancorp in IN, reportedly is a candidate for a board seat designated for a community banker. Trump has sent mixed signals about whether he would nominate Yellen for a second term.

"I fully intend to serve out my term as chair", Yellen said at a press conference Wednesday in Washington, adding, "I have not had conversations with the president about future plans", Bloomberg reported.

(Copyright © 2015. All Rights Reserved.)
 
Recommended

Crude oil rises on tightening supplies, West Asian tensions
Energy Information Administration (EIA) reports its official figures for U.S. stockpiles at 1500 GMT on Thursday. Brent crude, the global oil benchmark, fell 1.8% to $49.71 a barrel on London's ICE Futures exchange.

India win toss, choose to bowl against South Africa
South Africa responded with back-to-back maiden overs but consecutive boundaries for Dhawan just about kept India on course. Pakistan , being Pakistan , stunned South Africa while Sri Lanka lifted its game remarkably to get past India .

New Zealand wins toss, will bowl 1st against England
Morgan added: "With the inconsistent bounce in the pitch, I genuinely thought that if we took one wicket, we would take two". With Australia and Bangladesh sharing the spoils in their draw on Monday, England now lead Group A with four points.

Apple iPad Pro 10.5 is Apple's best tablet
In his words, "if Apple pushed the idea of iPad Pro as PC replacement too aggressively, it would implicitly disparage the Mac". The screen has impressed users so much that there are now calls for Apple to bring the technology to the next iPhone.

What Is The DUP? The Democratic Unionist Party Explained
The initial tally shows voters abandoning the Conservative Party, of which the current prime minister, Theresa May , is a member. There are many things on Foster's wish-list which will be of interest in the upcoming talks that largely centre around Brexit.

Kevin Durant, Stephen Curry lead Warriors to NBA title
The Golden State Warriors are right where they were last: up 3-1 in the NBA Finals against the Cleveland Cavaliers . They went up 3-0 in the series but ran into a determined group of opponents last Friday night in Cleveland.

Warriors beat Cavaliers to take NBA title
With a shot at his first NBA Championship, Durant had to step up more than ever with the pressure greater than it's ever been. Then the refs took center stage again with 3:08 to go in the half when J.R.

'I don't even remember having sex' - Diplo's savage response to Katy Perry
In some of the least surprising news of the summer, the Katy Perry-Taylor Swift drama fest continues. You'd be hard-pressed to find a favorable take on her live stream.

French Open 2017 champion Jelena Ostapenko: Anything is possible
Also missing was two-time major champ Victoria Azarenka , while No. 1 Angelique Kerber lost in the first round. She added: "It's a tough day today because I couldn't win but let's work, let's keep working, let's believe".

Judge clouts 22nd homer, propels Yankees past Angels 5-3
He took short toss and went out and took ground balls, felt good. "They have some big right-handed bats and he did a good job". The last Yankee to be the first to 20 homers was Alex Rodriguez in 2007, when he hit 54 and went on to be named the AL MVP .

Senior Cabinet minister offer support to UK prime minister
This is all the more so, given the alliance with the DUP , for whom an open border with the Republic of Ireland is a priority. Conservative Party loyalists urged her to change her leadership style, while critics talked about her days being numbered.

Top two aides to British PM May quit
The result left the DUP as kingmakers after picking up ten seats that will prop up Theresa May as she returns to Downing Street. The probability of a clean divorce from the European Union , a so-called "hard Brexit", can play out in different ways.

Minecraft is getting 'Super Duper' 4K graphics and cross-system servers
No longer separate editions, Windows 10 , console and mobile will all become one unified game , with all the same features. Minecraft continues to be a dominant force in Microsoft's video game lineup, pioneering cross-platform play like no other.

Penguins captain Crosby captures second straight Conn Smythe Trophy
So Rinne will need to be at his best to give Nashville a chance at its first Game 7 and Pittsburgh's third this postseason. Pittsburgh didn't give the Predators a chance to get started in Game 5 , jumping out to a 3-0 lead in the first period.

Wales face tough test on the road in Serbia
Star man Gareth Bale is missing through suspension and James Collins, Neil Taylor , Andy King and Hal Robson-Kanu are also absent. Ireland's next fixture is away to Georgia, and that has become an absolutely massive game in the context of this group.


More News

News
More News