Chair Janet Yellen’s Federal Reserve wraps up a two-day meeting on Wednesday in Washington. Expectations for a summer rate hike plummeted earlier this month after the Labor Department reported disappointing job growth for May .
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Which leaves us (or at least me) having to pore over the next jobs report to see how likely a rate rise is in July.
But Yellen may look past this and other excuses to delay rate hikes “because monetary policy affects the economy with a lag”, she said recently in Philadelphia.
But her phrasing hardly indicated that there was a high probability of an increase. The longer term outlook for rate rises has been slashed due to the mediocre economic outlook and anticipated subdued inflation. With Yellen’s emphasis on unusually weak productivity, disappointing wage growth and low inflation, downward revisions can not be excluded. The Fed chair also said the vote’s outcome could affect future rate decisions.
“Brexit, the upcoming United Kingdom decision on is something we discussed, and it is fair to say it was one of the factors that factored into today’s decision”, Fed Chair Janet Yellen told a nationally televised news conference. There is grave uncertainty about whether British voters will choose to leave the European Union in a June 23 referendum.
The Fed is mandated by Congress only to promote maximum employment and stable prices, but some believe the stock market is factoring into the Fed’s decision-making these days.
The chances are small we see a rate hike today, but they’re greater than zero.
Their unemployment rate forecasts were little changed.
The Fed’s preferred measure of inflation will be 1.4 percent this year, slightly higher than the March forecast of 1.2 percent. Aluminum producer Alcoa rose 45 cents, or 5 percent, to $9.54 and gold miner Newmont Mining added $1.16, or 3 percent, to $36.34. In March, the median projection fell to two quarter-point hikes this year, versus a prior expectation for four. That suggests they are less anxious about the economy overheating and pushing inflation higher. Still, a majority of Fed officials continue to envision two rate hikes this year. They foresee the short-term rate reaching 2.4 percent by the end of 2018, still quite low by historical standards.
The Federal Reserve is expected once again to pump the brakes. Not all of those 17 officials are voting members this year. This improves the mood just a bit, but should have an impact on the Fed, so it’s a “risk on” move for markets, which is bad for the dollar. Yet it signaled concern about the uncertainty of employment growth and global developments.
Although worries about the health of the global economy have eased, a sharp slowdown in USA hiring in May was unsettling. “Every meeting is live”.
As a mortgage holder or potential homebuyer, you should definitely be aware of rising interest rates on the horizon.
Many economists now expect the Fed will not move before September; Fed fund futures trading on the CME show the markets expect December at the earliest.
The Federal Open Market Committee (FOMC) will release a policy statement at 2:00 p.m. ET (1800 GMT). Does it feel certain that inflation will soon reach its 2 percent annual target?
Nearly an hour into the trading day and all major US indexes are rising strongly.
Nasdaq 100 e-minis were up 10.75 points, or 0.24 percent, on volume of 27,631 contracts.
Europe and Asian markets are also up.
Meanwhile, Japanese stocks rose in choppy trade, snapping a four-day losing streak thanks to short-covering, while coming central bank meetings and worries that Britain might vote to leave the European Union kept investors on edge. The Federal Open Market Committee signalled an even more gradual path for any future rate increases.
The central bank, led by Chair Janet Yellen, is expected to announce that it is not raising the key USA interest rate at the conclusion of its two-day meeting on Wednesday.
The S&P 500 .SPX was up 4.45 points, or 0.21 percent, at 2,079.77.
OVERSEAS: France’s CAC 40 climbed 1.5 percent and Germany’s DAX rose 1.2 percent.
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The Fed is not expected to announce a second rate hike in the current tightening cycle on Wednesday. Those views were dashed by weak jobs reports.
