Japan will speed up deployment of government cash in coming months as a surprise drop in consumer spending in February triggered concern the nation’s long-awaited inflation is now damaging purchasing power.
Finance Minister Taro Aso told reporters that data showing a slump in household expenditure two months before the first sales-tax increase since 1997 was a problem, and Prime Minister Shinzo Abe’s administration will pour 40 percent of outlays for the next fiscal year into the April-June quarter. He’d already pledged to fast-track stimulus spending.
Data today also showed inflationary pressures are spreading even before the 3 percentage-point sales-tax increase take effect on April 1, as the price of durable goods soared the most since the early 1980s.
US stocks fell on Thursday, erasing most of the S&P 500's year-to-date gain, as banking and technology stocks led the selloff. The benchmark S&P 500 turned nearly flat for the year after falling almost 1 percent this week as many of the market's biggest trading favourites lost their momentum. "The decliners once again are the tech and small-cap names. The decline is not as steep as it was earlier this week, but the continued weakness we see in these sectors suggests that investors are becoming more cautious as money continues to leave the stock market," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, Ohio.
Citigroup shares slump after Fed rejects capital plan
Big tech names also dropped, including Google Inc, off 1.6 percent at $1,114.28, Microsoft down 1.1 percent at $39.36, and Amazon.com down 1.4 percent at $338.47.
Market jumped: The Federal Reserve struggled last month over how to convey to investors how fast it will raise short-term interest rates once it increases them from record lows.
The Fed held a previously unannounced March 4 videoconference to debate the issue in advance of its regular March 18-19 meeting, according to minutes of the meeting released Wednesday.
In the end, the Fed decided on an open-ended approach: That even after employment and inflation are nearly back to normal levels, short-term rates may need to stay unusually low for a while because the economy isn’t fully healthy.
Yellen says Federal Reserve considering tougher rules for big banks
The Federal Reserve is considering tougher rules for big banks to keep credit flowing in case of another financial crisis, Fed Chairwoman Janet L. Yellen said Tuesday.
Although officials from the Fed and regulatory agencies approved more stringent requirements for the eight largest banks last week, Yellen said additional measures might be needed to keep short-term credit markets from freezing up during stressful financial conditions.
Fed's Rate Policy Hinges on 3 'Big Questions' Federal Reserve officials will weigh three "big questions"--including low inflation and labor-market slack--as they consider when the economy is finally healthy enough for the central bank to begin raising rates, Fed Chairwoman Janet Yellen said.
In a speech at the Economic Club of New York on Wednesday, Ms. Yellen said a too-low inflation rate is a bigger worry than the Fed's easy-money policies sparking a surge in consumer prices. She also reiterated her arguments from a late-March speech that she sees quite a bit of slack left in the labor market in measures other than the official jobless rate, which stood at 6.7% in March.
The comments underscore Ms. Yellen's continued concern about the economy and labor markets despite some promising signs, and reinforce her message that the Fed plans to keep interest rates low for a long time to come.
In addition to inflation, Fed officials must monitor the amount of "slack" in the labor market and other unforeseen developments that could push the economy off its expected course, she said.
Ms. Yellen said that persistently low inflation is worrying because it can lead to deflation, a broad decline in consumer prices that can be difficult to reverse and lead to "prolonged periods of very weak economic performance." But even if outright deflation is avoided, a long period of very low inflation can be risky as well, she said, in part because it makes it harder for households and businesses to pay off debts, potentially weighing on economic growth.
Fed officials must also stay vigilant for the unexpected, Ms. Yellen stressed. "What factors may be pushing the recovery off track?" is the question they must keep asking themselves, she said, pointing to past moments since the end of the 2007-09 recession where the economy appeared to be turning a corner only to be derailed.
Fed's Beige Book points to pick-up in U.S. growth conomic growth strengthened throughout the country with a broad pick-up in manufacturing, "brisk growth" at some shipping ports and steady consumer spending, the Federal Reserve said on Wednesday.
The central bank's Beige Book of anecdotal economic reports from around the country noted modest to moderate growth in all 12 Fed regions - a positive change from the April document when some parts of the country were still struggling through severe winter weather. http://www.reuters.com/article/2014/06/04/us-usa-economy-fed-idUSKBN0EF20620140604
Federal Open Market Committee meets Tuesday and Wednesday and will issue a statement announcing any policy shifts at 2 p.m. Wednesday. Fed Chair Janet Yellen will hold a press conference a half-hour after the statement is released.
U.S. Stocks reacting so slow => Decline Amid Tension in Middle East, Data
U.S. stocks declined, with equity benchmarks dropping a second day from record levels, as reports of escalating violence in the Middle East overshadowed data that boosted optimism in the world’s biggest economy.
Intercontinental Exchange fell 3.8 percent after an analyst downgraded the rating on the stock. D.R. Horton Inc. jumped 2.2 percent to lead a homebuilder index higher. Vertex Pharmaceuticals Inc. surged 40 percent after releasing results of a drug trial. Micron Technology Inc. (MU) rose 4.6 percent after reporting profit and sales that topped analysts’ estimates.
The Federal Reserve said it would end its long-running bond-purchase program, concluding a historic experiment that stirred disagreement among policy makers, economists and investors about its impact even though the central bank said it helped accomplish its goal of reducing unemployment.
nearly six years and more than $4 trillion in purchases later, central bank policymakers declared Wednesday that the economy is strong enough for the Fed to end the unprecedented program.
In their statement following a two-day meeting, Fed officials gave their best assessment of the labor market in years, citing the "solid" job gains in recent months and the faster-than-expected drop in the unemployment rate, which fell to 5.9% in September.
Most see that first rate hike coming in the middle of next year, but some analysts have pushed those expectations to later next year because of the uncertain growth prospects in major economies around the world.
Dollar hits seven-year high vs. yen ahead of Fed minutes The dollar hit a seven-year high against the yen on Wednesday ahead of minutes from the U.S. Federal Reserve's latest policy meeting, as investors bet on an increasingly divergent outlook for the world's major economies.
The Fed is expected to raise interest rates at some point in 2015 as the U.S. economic recovery broadens, but markets will be looking closely at the minutes due later in the day for any signs of when the first hike will happen.
The BoJ kept monetary policy unchanged on Wednesday with Governor Haruhiko Kuroda telling a news conference the bank's stimulus was exerting its intended effect, just two days after data showed Japan unexpectedly slipping back into recession.
The yen JPY= fell as low as 117.655 to the dollar, its weakest since October 2007, and was last close to that low at 117.605, down 0.7 percent on the day.
U.S. economy in second and third quarters produced the strongest back-to-back expansion since 2003 the U.S. recovery hummed through the summer at an unexpectedly robust pace and posted its best six-month performance in 11 years.
The following are highlights of Federal Reserve Chair Janet Yellen's remarks at a press conference following the conclusion of the U.S. central bank's two-day policy meeting on Wednesday.
ON CONGRESSIONAL THREAT TO FED'S INDEPENDENCE
The ability of the central bank to make the decisions about monetary policy that it regards as in the best longer-run interest of the economy, free of short-run political interference, is very important to the effective conduct of monetary policy. I think history shows that not only in the United States but around the world that central bank independence promotes better economic performance. I do think central bank independence is important.
ON RUSSIA
Well we certainly did review global economic developments including developments in the Russian economy. Clearly Russia has been hit very hard by the decline in oil prices and the rouble has depreciated enormously in value and this is posing a series of very difficult economic conditions in the Russian economy. Of course we discussed what the potential spillovers are to the United States, which could occur both through trade and financial linkages. But these linkages are actually relatively small.... in the case of the United States I see the spillover as pretty small but we're obviously watching that closely.
ON RATE RISES NOT NECESSARILY "MEASURED"
There certainly has been no decision on the part of the committee to move at a measured pace or to use language like that....We'd probably not like to repeat a sequence in which there was a measured pace and 25-basis point moves at every meeting....
We expect to be able to normalize policy but until those conditions have lifted that have held back economic activity monetary policy will need to stay accommodative. So in that sense perhaps that's equivalent to saying that the path of normalization is anticipated to be relatively gradual but again the path of rates will depend on how economic conditions actually evolve. And that's nothing more than an expectation on the part of the committee.
Yellen to shed light on market's biggest mystery On Tuesday and Wednesday, Federal Reserve chair Janet Yellen is set to testify before the U.S. Senate and House, respectively. Investors will likely be listening with keen ears, hoping for a hint about when the Fed will finally hike interest rates from their crisis-era lows.
In the minutes from their January meeting released on Wednesday, Fed policymakers appeared a bit less eager to hike rates than investors had anticipated.
In somewhat opaque language, the central bank's policy committee said that "many participants indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time."
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