The Federal Reserve signaled its confidence Wednesday in the US economy by raising a key interest rate for a third time this year, forecasting another rate hike before year's end and predicting that it will continue to tighten credit into 2020 to help manage growth and inflation.
The rate increase announced Wednesday lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2.00% to 2.25%. It was its eighth hike since late 2015.
The Fed noted that inflation has remained near its 2 percent objective.
The Fed could fine-tune, or reverse, its rates strategy and/or its balance sheet strategy if the U.S. were suffer a significant slowdown or an implosion in its financial markets - markets priced as if the Trump-inflated growth rate can be sustained indefinitely.
It also dropped a reference in its statement to the word "accommodative", although Fed Chairman Jerome Powell later said policy was still accommodative. "Growth is running at a healthy clip, unemployment is low". Inflation is low and stable.
The chairman added, though: "Of course, that's not to say everything is ideal".
Ripple Soars, Overtakes Ethereum As 2nd Largest Crytpocurrency
As always, only the coming weeks and months can tell where the journey is headed for the very volatile cryptocurrency market. On September 23, Bitcoin came close to breaking out of the $6,800 resistance level but struggled in the higher end of $6,700.
Powell said the gradual pace was helping to support the continued economic expansion, even as the benefits have not reached all Americans. "We could do other things with the money". However, the Fed rate hikes will be consequential for the region's energy dependent economies. "Financial markets should prepare for a more hawkish tone", Natixis economists Joseph Lavorgna and Thomas Julien wrote ahead of the meeting.
As of Tuesday morning, futures markets put the odds of a rate hike this month at 94.4 per cent, with a small but growing share of investors, or nearly six per cent, betting the Fed will even raise rates by 50 basis points.
As the Fed also hinted on raising rates again in December, . global market analysts are eyeing the speed of the rate hike.
That would put the benchmark rate at 3.4 percent in two years - roughly half a percentage point above its estimated "neutral" rate of interest that neither stimulates nor restricts the economy. At that point, it would regard its policy as modestly restraining growth. "I'm not happy about that", Trump said in a press conference.
So far, U.S. interest rates remain relatively low, reflecting the Fed's decision to lower them dramatically during the financial crisis in an effort to encourage borrowing and boost economic activity.
"We don't consider political factors".
"We are doing great as a country", Trump said Wednesday at a press conference in NY. "My colleagues and I are focused, exclusively, on carrying out that mission". But since late 2015, the average 30-year fixed mortgage rate has increased from approximately 3.9 percent to 4.6 percent, as of September 13. Not since the late 1960s has unemployment fallen that low. It foresees the economy growing 3.1 per cent this year before slowing to 2.5 per cent in 2019, 2 per cent in 2020 and 1.8 per cent in 2021. This is the first time since before the financial crisis that the Fed's target has been above 2 percent.
Trump tells UN Security Council Iran must never gain a nuclear weapon
But Trump's fear of America being mocked on the global stage runs further back than the 2016 election. Rouhani said that the U.S. should either rectify its mistake or continue with this wrong process.
But he acknowledged that the bank is hearing a "rising chorus of concerns" from businesses about the risk from new USA trade tariffs, which have disrupted supply chains and led to retaliation against U.S. exports. In the wake of an oil slump that began in 2014 and lower borrowing rates GCC sovereigns turned to capital markets to raise funds to meet their spending needs. But Trump just tripled the amount of tariffs in place this week with his latest import taxes on Chinese goods. While measured labor productivity has tilted up in the previous year, the growth in the labor force (and steady labor force participation rate) is exceeding the Fed's assumptions.
Powell also commented on the ongoing trade war and its effect on inflation. "A neutral to dovish speech from Chair Powell could boost gold prices, especially if it comes from more mentions of trade turmoil risks".
"It's a concern", Powell said.
If you took a class in Futures 101 then you should know that the futures markets discount future events.
While you might see an increase in mortgages, for example, lenders are trying to assess the rate environment over several decades.
Powell said the Fed would proceed gradually, taking into account the long and variable lags of past tightening moves.
Brett Kavanaugh accuser Christine Ford testifies before Senate hearing
Jeff Flake is an undecided Republican on the Judiciary Committee who is retiring and has made an enemy of Trump. Maybe Grassley will recover before Ford leaves the hearing, or in today's later questioning of Kavanaugh.
- Ian Wright names the man to blame for likely Aaron Ramsey exit
- Kavanaugh protests escalate, over 120 arrested on Capitol Hill
- The most memorable moments from Christine Blasey Ford's testimony
- Mourinho to Pogba: You are the anti-captain
- Julie Swetnick accuses Brett Kavanaugh of sexual misconduct
- Ford on why she decided to take a polygraph test
- Tesla stock plummets after SEC's fraud complaint against Musk
- U.S. slaps sanctions on wife of Venezuelan President Maduro
- Jimmy Butler is already changing his mind about trade destinations
- European Union announces legal entity to maintain business with Iran