“Long-term rates, i.e., those that are likely to influence mortgage rates, are mostly unchanged”, he says.
On the economic front, in the week ending June 10, the advance figure for seasonally adjusted initial claims was 237,000, a decrease of 8,000 from the previous week’s unrevised level of 245,000, said the U.S. Labor Department Thursday. On average, stocks have lost 1.19% in the year after the fourth rate hike without a cut following.
Overall, gold was subjected to further selling with 3-week lows just below $1,255 per ounce.
However, Yellen said business and household confidence remain quite strong, and echoed the statement from the Fed’s policysetting Federal Open Market Committee, which repeated its confidence that the usa economy would continue to expand “at a moderate pace” even with further gradual rate increases. Despite this, the finance ministry said it will strengthen its monitoring of the nation’s financial markets and come up with countermeasures. Is it that the market has made a decision to ignore the Fed because they are sceptical about inflation?
In 2007, as recession began to bite, the benchmark federal funds rate was 5.25 per cent. However, with the increased risk of political turmoil, it’s highly unlikely that the BoE will hike rates anytime soon unless inflation went out of control. Some economists suggested that even though the Fed foresees one more rate hike this year, the persistently low inflation may lead it to leave rates alone until 2018.
Ms. Yellen and her colleagues on the Federal Open Market Committee have also done well to ward off a 2013 “taper tantrum“-like scenario by flagging the projected path of balance sheet normalisation – a deliberate and clearly calibrated set of reductions that increase over time – without detailing a schedule for the start of the process”.
“All indications from the FOMC statement, forecasts and chairwoman (Janet) Yellen’s press conference are that the FOMC will take a “gradual” approach and will remain data-dependent”, they added.
Long-dated U.S. Treasury yields had tumbled to their lowest since early November on Wednesday after surprisingly weak data on inflation and retail sales overshadowed the Fed’s interest rate hike. Not always, but this disparity is odd, and could play havoc with asset prices if the market has been wrong-footed and needs to play catch up with the Fed, which could see a sharp turnaround for the dollar and U.S. [bond] yields, ‘ Brooks warned. Tighter labor markets, she said, would put that needed upward pressure on inflation.
Piegza also touched on what else policymakers said in connection with Wednesday’s rate action.
US stocks edged lower and prices of US Treasuries pared gains after the Fed’s policy statement.
“Without sizable and clear additional weakness, the Fed appears steadfast in their commitment to one additional rate hike this year”. For this reason, the event studies literature has increasingly looked at shorter time windows around the moment of the announcement, on the premise that within 15 or 30 minutes of the Fed’s announcement, monetary policy could reasonably be viewed as the most important factor. The basic idea will be that the Fed will stop reinvesting the principal of securities when they mature. Precisely, the Fed aims to reduce fixed amount of assets on a monthly basis.
For agency debt (MINT) and mortgage-backed securities (MBB), this cap would be $4 billion per month, rising by $4 billion every quarter until a cap of $20 billion per month is reached. The first time was in March, when it boosted the fed funds rate by 25 basis points, or 0.25 percentage points. The bank also said it would initiate cutting its bond assets and other securities in this year.