Wednesday, 17 October, 2018

US Fed's predictions put it on a collision course with Donald Trump

Fed announces interest rate decision US Federal Reserve raises interest rates amid strong growth
Elsie Buchanan | 30 September, 2018, 05:12

If you have credit card debt, take the next U.S. Federal Reserve move to raise interest rates as a big, flashing warning sign. The Dow Jones Industrial Average fell 0.4 percent to 26,385.28. If inflation stays very close to 2% and if inflationary expectations-as reflected in the array of market and survey based measures the Fed monitors-remain well anchored, the Fed will slow its rate increases once it gets its funds rate target close to 3%.

Higher interest rates make borrowing more expensive, slowing economic activity and curbing price inflation.

Powell said businesses have raised concerns about the impact of trade conflicts, but the Fed has not seen much of an impact on the economy so far.

Federal Reserve Chairman Jerome Powell says the United States economy will suffer if widespread tariffs are in place for long.

The announcement "was pretty well telegraphed", said JJ Kinahan, chief market strategist at TD Ameritrade, told AFP. Importantly, as the Fed lowered its estimate of potential real GDP growth from 2.6% in 2010 to 1.9% presently, it lowered its estimate of the appropriate longer-run funds rate consistent with its 2% inflation target by even more, from 4.25% in 2012, to 2.9%, which adjusted for inflation is 0.9% (Chart 1).

Large banks retreated as 10-year bond yields fell, with JPMorgan Chase, Citigroup and Bank of America all shedding more than one per cent. That wording had become less and less accurate since the central bank began increasing rates in late 2015 from a near-zero level, and its removal means the Fed now considers rates near neutral.

As of past year, the average variable rate on a private student loan was 7.81 percent.

September's figures also included their first projections for 2021.

"I'm not thrilled with his raising of interest rates, no".

Elon Musk Is Being Sued by the SEC for Fraud
Grundfest also said that the challenge for the SEC is to "appropriately discipline Musk while not harming Telsa's shareholders". Grundfest said there are many potential ways the case could be settled, including some scenarios in which Musk stays on as CEO.


Online banks have been upping their game over the past year, with some rates rising to about 2 percent.

The U.S. economy, as measured by the gross domestic product, is expected to grow 3 percent for 2018 as a whole.

The Fed's latest quarter-point rate hike, its third this year, was widely expected by investors. That's a significant jump from the 4.45 percent rate of the prior school year, and it's the highest since 2009-10, when it was 5.6 percent.

Wages were not the only riddle hanging over the two-day meeting of the Federal Open Market Committee, the Fed's board of policymakers.

At a press conference following the Fed's decision, Powell said U.S. central bankers were "focused exclusively" on its mandate to pursue full employment and stable prices. "Many of our country's economic challenges are beyond the scope of the Fed". That causes those bonds' prices to drop, and the dynamic has caused numerous most popular bond funds to lose money this year.

Treasury yields dipped on Wednesday, a step back from their steady rise this year.

MSCI emerging market currency index rose 0.2 percent on Wednesday. West Texas Intermediate (WTI) crude futures gained 1.2 percent to $72.45 a barrel.

"Unfortunately, they just raised interest rates", Mr Trump said at a press conference in NY, where he was attending the annual United Nations General Assembly.

The Fed's key short-term rate now stands in a range of 1.75-2 percent after two quarter-point increases in March and June.

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