Yellen says Fed rate hike likely appropriate in coming months
The Federal Reserve should raise interest rates "in the coming months" if the economy picks up as expected and jobs continue to be generated, U.S. central bank chief Janet Yellen said on Friday, bolstering the case for a rate increase in June or July.
"It's appropriate ... for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate," Yellen said during an appearance at Harvard University.
Her comments, while balanced, suggested the powerful Fed chair is on board with several of her colleagues who in recent weeks have said the central bank is preparing to follow up on an initial policy tightening in December.
Weak oil prices and a strong dollar have been blamed for helping to keep U.S. inflation below the central bank's target.
She has a second public appearance scheduled for June 6 in Philadelphia, just a week before the next policy decision.
World Bank cuts global growth forecast on weak demand, commodity prices
The World Bank slashed its 2016 global growth forecast on Wednesday to 2.4 percent from the 2.9 percent estimated in January due to stubbornly low commodity prices, sluggish demand in advanced economies, weak trade and diminishing capital flows.
Commodity-exporting emerging market countries have struggled to adapt to lower prices for oil, metals, and other commodities, accounting for half of the downward revision, the multilateral lender said in its latest Global Economic Prospects report.
It expects these economies to grow at a meagre 0.4 percent pace this year, a downward revision of 1.2 percentage points from the January outlook.
Commodity-importing emerging market countries are faring better, but the benefits of lower energy and other goods have been slow to materialise, the World Bank said. It now expects growth in these countries will reach 5.8 percent, down a tenth of a percentage point from the January forecasts.
In the United States, a steep decline in energy sector investment and weaker exports will also shave eight tenths of a percentage point from the World Bank’s 2016 forecast, bringing growth to 1.9 percent.
The euro area saw a slight downgrade of its 2016 forecast to 1.6 percent, despite extraordinary monetary policy support and a boost from lower energy and commodity prices.
The downgraded World Bank forecast follows a similar move by the International Monetary Fund, which cut its growth forecasts two months ago.
Among major emerging market economies, the World Bank kept China’s growth forecast unchanged at 6.7 percent this year after 2015 growth of 6.9 percent. It expects China’s growth to slow further to 6.3 percent by 2018 as the world’s second-largest economy rebalances away from exports to a more consumer-driven growth model.
India’s robust economic expansion also is expected to hold steady at 7.6 percent, while Brazil and Russia are projected to remain in deeper recessions than forecast in January.
South Africa is forecast to grow at a 0.6 percent rate in 2016, 0.8 of a percentage point more slowly than the January forecast.
Fed minutes suggest rate hikes on hold until Brexit impact clearer
Federal Reserve policymakers decided in June that interest rate hikes should stay on hold until they have a handle on the consequences of Britain's vote on EU membership, according to the minutes of the Fed's June policy meeting released on Wednesday.
The minutes of the June 14-15 meeting, which took place ahead of the June 23 referendum in which Britons voted to leave the European Union, showed widespread unease over the so-called "Brexit" vote, including among voting members on the rate-setting Federal Open Market Committee.
"Members generally agreed that, before assessing whether another step in removing monetary accommodation was warranted, it was prudent to wait for additional data on the consequences of the U.K. vote," according to the minutes.
Worries have only intensified since the vote and Fed Governor Daniel Tarullo cited the rise in uncertainty on Wednesday when he argued for holding off on rate hikes until inflation had turned decisively higher.
At the June policy meeting, policymakers also cited a severe slowdown in hiring by U.S. employers as a reason for leaving interest rates steady last month, the minutes showed.
The Brexit vote shocked investors and triggered $2 trillion in losses in global stock markets the day after the referendum.
On Wednesday, U.S. benchmark and long-dated Treasury yields hit record lows, with some investors betting the Fed would keep rates on hold through 2017.
Fed Beige Book: Brexit Weighs on Outlook in Some Regions
The U.K. vote to leave the European Union is causing concern among businesses in certain pockets of the U.S., a Federal Reserve report said Wednesday.
The Brexit vote was a factor in recent weeks across at least three areas, according to the central bank's latest beige book, a review of regional economic conditions. But broadly, the report showed the U.S. economy is expanding at a modest pace.
In the Dallas region, for example, "outlooks were generally positive but more cautious, with the upcoming presidential elections and the Brexit vote driving some of the uncertainty," the report said.
The survey collected anecdotal information on economic conditions through July 1 in the 12 Fed districts, so it provides policy makers an early look at how the June 23 Brexit vote affected the U.S. economy. The survey was released two weeks ahead of the U.S. central bank's next policy meeting, scheduled for July 26-27.
In the Chicago region, "financial market participants reported a significant increase in volatility, driven primarily by the United Kingdom's vote." In Boston, two technology firms cited the fallout from Brexit as a "potentially destabilizing factor," though a commercial real estate contact there said instability in Europe could boost foreign investment in the U.S.
However, reports from several other regional Fed banks made no mention of the vote or its potential impact on the economy.
Most other recent economic reports haven't covered the late-June time frame when financial markets swung wildly after the Brexit vote. For example, June's strong jobs report looked at the hiring situation during the middle of the month.
A report from the Institute for Supply Management, released July 1, did find that 38% of U.S. manufacturing firms and 32% of services firms surveyed expected at least some negative impact due to the Brexit vote.
When Fed officials last met June 14-15, they held their benchmark short-term interest rate steady. That meeting came on the heels of a May jobs report showing a sharp slowdown in hiring, and was just more than a week before U.K. voters went to the polls.
Given the uncertainty around the U.K.'s pending departure from the EU, many economists expect the Fed to hold its rate steady again later this month. However, a rebound in stock markets in recent weeks and better hiring last month could allow the Fed to increase rates later this year, if the economy maintains momentum.
FED Reserve's latest Beige Book: The economy is still progressing at a 'modest' pace The release is a compilation of economic anecdotes from across the Fed's 12 districts and covers areas ranging from real estate to employment. It's prepared ahead of the Fed's policy meetings and informs the discussions that take place there.
This release, compiled on or before August 29, showed that consumer spending, which accounts for much of the economy's progress, remained little changed.
Labor markets in most districts remained tight, the Fed said, which increased wage pressures and gave workers with highly specialized skills higher salaries.
The Fed cautioned about potential overvaluation in the market for commercial real estate in the minutes of its August meeting. In the Beige Book, it said market activity expanded in most districts.
Agricultural producers in many districts said lower prices amid huge yields pushed down their revenues.
The focus of markets right now, however, is on what the Fed does at its upcoming meeting from September 20-21. Most market participants anticipate that the Federal Open Markets Committee will hold off on raising interest rates until its meeting in December.
market rise after Fed keeps rates steady, signals one hike by end of year The U.S. Federal Reserve left interest rates unchanged on Wednesday but strongly signaled it could still tighten monetary policy by the end of this year as the labor market improved further.
Fed Chair Janet Yellen, speaking after the central bank's latest policy statement, said U.S. growth was looking stronger and rate increases would be needed to keep the economy from overheating and fueling high inflation.
"We judged that the case for an increase has strengthened but decided for the time being to wait," Yellen told a news conference. "The economy has a little more room to run."
Yellen said she expected one rate increase this year if the job market continued to improve and major new risks did not arise.
The Fed kept its target rate for overnight lending between banks in a range of 0.25 percent to 0.50 percent, where it has been since it hiked rates in December for the first time in nearly a decade.
The central bank has appeared increasingly divided over the urgency of raising rates. On Wednesday, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren dissented on the policy statement, saying they favored raising rates this week.
Federal Reserve officials who favor hiking interest rates worry that waiting too long could send the country into recession.
At an unusually divisive Federal Open Market Committee meeting in September, hawkish members said history holds a worrisome lesson for a central bank that has kept a historically accommodative monetary policy in place for the past eight years.
"A few participants referred to historical episodes when the unemployment rate appeared to have fallen well below its estimated longer-run normal level. They observed that monetary tightening in those episodes typically had been followed by recession and a large increase in the unemployment rate," said a summary of the meeting released Wednesday.
The worry is that if the Fed waits too long, it could be forced into having to raise rates aggressively to slow the economy.
For a look at the full minutes of the FOMC meeting, click here.
Following the release of the minutes on Wednesday afternoon, U.S.-traded shares remained higher, with the S&P 500 up about 0.3 percent.
Ultimately, the FOMC decided not to hike. The dovish side argued that the economy is still growing slowly — gross domestic product for the first half of the year was around 1 percent — and that inflation remains muted, meaning that the chances for having to change course abruptly is low.
Three members, however, dissented, looking for the Fed to approve a quarter-point hike that would have been only the second increase in more than 10 years. The "no" votes came from Esther George, Loretta Mester and Eric Rosengren.
With unemployment at 5 percent and inflation making slow progress toward the Fed's 2-percent target, debate has intensified over when the FOMC should start normalizing policy. The Fed took its key funds rate to near-zero in late-2008 during the financial crisis. Along with low rates, the Fed also expanded its balance sheet by some $3.7 trillion in three rounds of a monthly bond-buying program known as quantitative easing.
Market dips after Fed Sends New Signals About a Possible December Rate Increase FOMC says ‘case for an increase in the federal funds rate has continued to strengthen’
The data-dependent Federal Reserve isn’t likely to contest the evidence: The economy looks strong enough to withstand another interest-rate increase.
It will take a couple of months for U.S. central bankers to figure out the economic policies of President-elect Donald Trump. What they know now is that stock markets are hitting record highs, market-expectations of inflation are moving up and consumer sentiment has improved since the election -- all of it signaling the time is right to raise the benchmark lending rate.
“They have talked it to death,” said Gennadiy Goldberg, interest-rate strategist at TD Securities USA LLC in New York. “December is on.”
Fed officials earlier this month saw a strengthening case to raise rates as the labor market tightened, with some saying a hike should happen in December, according to minutes of their Nov. 1-2 gathering released Wednesday in Washington. They made no direct reference to the national election a week later that would unexpectedly propel Trump to the White House.
“Some participants noted that recent committee communications were consistent with an increase in the target range for the federal funds rate in the near term or argued that to preserve credibility, such an increase should occur at the next meeting,” the record of the Federal Open Market Committee meeting showed. Many officials said a rate rise could be appropriate “relatively soon,” data permitting, it said. ‘Getting Stronger’
Fed officials will hold their final meeting of the year on Dec. 13-14. While it is still difficult to tell what policies Trump will put in place, market indicators are defaulting to a forecast of faster growth and higher inflation. That’s boosted expectations of a rate increase next month. Investors see a 100 percent probability of a move, according to pricing in federal funds futures contracts.
“The Fed meeting minutes say that the case for a rate hike keeps on getting stronger and stronger,” Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in an e-mail. “Reading through their deliberations one cannot help but feel a rate hike in December is a done deal.”
The Federal Reserve said it remains on track to gradually raise short-term interest rates this year and gave no hint about when the next increase might come.
Following a two-day policy meeting, central-bank officials unanimously held their benchmark rate steady in a range between 0.50% and 0.75%, while noting in a statement some recent improvements in the economy. They lifted rates by a quarter percentage point last month and penciled in three quarter-point moves in 2017.
Comcast and Verizon’s Sneaky Push to Kill Net Neutrality Is Just Embarrassing
A week after FCC Chair Ajit Pai outlined his plan to kill net neutrality, the internet providers who support his proposal are spinning the effort harder than a 20-something at SoulCycle. The basic message from companies like Comcast and Verizon is this: “We don’t want to get rid of net neutrality and/or an open internet itself. We merely want to do away with the rules through which net neutrality was established, because reclassifying broadband providers under Title II was bad.”
Theoretically, it’s smart strategy. Who the fuck really knows what Title II is, let alone net neutrality? Jargon like this can be useful, especially when it’s used to distract consumers who don’t have much expertise in arcane policy procedures. After all, most people probably don’t know that Title II is the only thing that gives our current net neutrality policy any teeth.
It’s important to remember, however, that ISPs are also pretty clueless, particularly when it comes to convincing the public to trust them. In the clumsy hands of telecom giants whose terrible reputation precedes them, the plan of attack has turned into a chorus of lame blog posts, bizarre videos, and frantic tweets at random people on the internet. In fact, so far, the fight they’ve put up has been odd, uncertain, and, frankly, lame as hell.
The Fed raised its benchmark rate by a quarter percentage point at its last meeting in March to a target range of 0.75 percent to 1 percent.
Before this week's meeting most Fed policymakers had made it clear that in contrast to previous years the central bank feels more confident in its forecast of two more rate increases in 2017.
Wednesday's affirmation from the Fed that it was optimistic on economic growth and that its rate rise plans remained intact bolstered the dollar against the euro and yen and pushed Treasury yields slightly higher.
Some analysts said the Fed's statement showed officials looking past recent signs of slow economic growth and holding course toward raising rates again in June.
Materials shares in the S&P 500 fell 1.1%, weighed down by a sharp decline in copper prices that came as growing inventories coincided with fears about slowing demand from China. Freeport-McMoRan lost 5.7%. DuPont fell 1.7%, among the biggest percentage declines in the Dow industrials.
Falling shares of Apple also dragged on major indexes. The Nasdaq Composite pulled back from recent records after the iPhone maker late Tuesday reported an increase in profit but tepid demand for its flagship product.
Apple pared losses to 0.3% after early declines Wednesday. Shares of the world's most-valuable company had soared to records earlier this year. Tech stocks have been the best performer in the S&P 500 in 2017, rising roughly 16%.
The U.S. Federal Reserve left interest rates unchanged on Wednesday but signaled it still expects one more increase by the end of the year despite a recent bout of low inflation.
Fed holds rates steady but points to higher inflation
The Federal Open Market Committee held the funds rate at a target of 1.5 percent to 1.75 percent, as expected. The committee noted that "overall inflation and inflation for items other than food and energy have moved close to 2 percent." The Fed also noted some improvements in the economy, saying, "business fixed investment continued to grow strongly."
The Federal Reserve kept its benchmark interest rate unchanged Wednesday but acknowledged that inflation is beginning to creep higher.
In a widely expected move, the central bank's Federal Open Market Committee held the funds rate at a target of 1.5 percent to 1.75 percent.
However, there were several tweaks to the post-meeting statement that market participants likely will find instructive. Markets that already were anticipating that the Fed would move to a more aggressive posture this year got more to chew on.
Perhaps most significantly, the committee noted that "overall inflation and inflation for items other than food and energy have moved close to 2 percent." That was an upgrade from the March meeting in which the FOMC said the indicators "have continued to run below 2 percent."
The change is key as Fed officials consider 2 percent to be a healthy level of inflation and a key for continuing to push rates higher.
Stocks edged higher after the announcement.
"I give them credit. They didn't change a whole lot and they didn't need to," said Joe LaVorgna, chief economist for the Americans at Natixis. "The equity market is really going to dictate how they're going to be able to raise rates."
Markets have been watching the central bank for clues as to how aggressive it will be this year. Expectations heading into the meeting were for a total of three rate hikes, with a fourth given a nearly 50 percent chance.
Despite Russia’s invasion of Ukraine and a sliding stock market, Federal Reserve Chair Jerome Powell told Congress on Wednesday the central bank plans to raise its key interest rate from near zero this month to fight a historic surge in inflation.
Powell said he'll propose a quarter-point hike, rather than a half-point, suggesting that's likely what the Fed's policymaking committee will approve.
“With inflation well above 2% and a strong labor market, we expect it will be appropriate to raise the target range for the federal funds rate at our meeting later this month,” Powell said at a House financial services committee hearing. "I would say we will proceed cautiously along the lines of that plan."
"I'm inclined to propose and support a 25 basis point rate increase," he added.
He noted, however, the Fed is prepared to possibly lift rates more sharply, depending on the effects of the Ukraine war and other developments.
"Inflation is too high – we understand that," Powell said. "It'll take some time but we're going to get it under control."
The Federal Open Market Committee FOMC) meeting schedule 2023: January 31-February 1. March 21-22* May 2-3. June 13-14* July 25-26. September 19-20* October 31-/November 1. December 12-13*
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