US Fed signals one rate hike in 2016: The US Federal Reserve signalled that it could tighten money policy by the end of this year or in December as the labour market improved further.
Advertisement
“The prospect that we could create some downside risk in the labor market is something we’d like to avoid”, Yellen told reporters following the Federal Open Market Committee’s two-day policy meeting.
“We judged that the case for a rate increase has strengthened, but decided for the time being to wait for further evidence of continued progress toward our objectives”, Fed Chair Janet Yellen said.
“Of course we are anxious that bubbles will form in the economy, and we routinely monitor asset valuations, while nobody can know for sure what type of valuation represents a bubble”, said Yellen at the news conference after the meeting of the regulator. “The economy has a little bit more room to run than we thought, which is good”.
Now as that realization sinks in, are “central banks willing to continue easing?”
The Fed raised rates for the first time in almost a decade in December but weak economic data and global uncertainty have prevented further rate increases. In a new round of economic projections published Wednesday, Fed officials predicted that the central bank’s benchmark rate would rise to 1.9 percent by the end of 2018, well below their March prediction that it would reach 3 percent by the end of 2018. Three of the 17 policymakers said rates should remain steady for the rest of the year.
Earlier on Wednesday, the BOJ set a new goal of keeping the 10-year Japanese bond yield at around its current level near zero percent, a move to aid banks squeezed by negative-interest rates, while preventing bond yields from rising high enough to reduce private-sector borrowing.
Investors did not appear to significantly shift their bets on the timing of the next rate hike.
Singapore-based DBS Bank’s analysts said in a note to clients on Thursday that the markets reacted “well to the Fed hold and the BOJ tweak”.
Oil prices rose about 1.6 percent as the dollar fell and USA crude inventories recorded a surprise drop.
The dissents from those wanting a hike this week suggested to some economists that pressure was building. That would cause the Fed to raise rates more quickly than it would otherwise like to, potentially derailing the economy.
Eswar Prasad, a professor at Cornell University and senior fellow at the Brookings Institution, told Xinhua that “we could see a rate hike at the end of this year” if the U.S. economy remains strong with good job growth and inflation continues to pick up.
CHECKS IN THE MAIL: FedEx boosted its forecasts for the year as it projected a record holiday season, and the shipping company posted better first-quarter results than analysts had expected. Inflation also showed signs of stirring last month. Most market participants expect the Fed to raise rates in December.
But that hardly changed the market’s perception of Fed policy.
Advertisement
Attention will now turn to this December’s rates meeting, with experts expecting that officials will avoid a rate hike in November, which would come just days before the United States presidential election.
