Fed Raises Rates — Anticipates Two More Increases This Year — Yellen Holds Press Conference

Last Updated Mar 15, 2017 at 2:19 pm ET
The Wall Street Journal

The Fed has voted to raise its benchmark fed-funds rate by a quarter percentage point, to a range of 0.75% to 1%. Fed Chairwoman Yellen’s press conference is set for 2:30 p.m.

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Janet Yellen, chair of the U.S. Federal Reserve Andrew Harrer — Bloomberg via Getty Images

Parsing the Fed

Our handy Fed Statement Tracker has been updated with today’s policy decision.

6m

Almost Unchanged Forecasts

Almost no change in Fed forecasts over the last three months. They basically think nothing of macroeconomic significance has happened.

There’s one especially notable thing in the FOMC forecasts here: nothing has changed, in the Fed’s view, for the U.S. economy over the past 3 months.

The rally in stocks? Some new folks taking office in Washington? If you think this has major macroeconomic significance then you’re thinking about it differently, apparently, than the Fed.

7m

Fed Up Activists Are, Well, Fed Up With Today’s Rate Rise

Not everyone’s feeling the love with today’s interest rate rise.

While inflation worriers may feel the central bank is taking more seriously its inflation control mandate, the left-leaning activists of the Fed Up Coalition are calling out the central bank for making what they see as a huge blunder. Shawn Sebastian, the group’s co-director, says “the data simply does not support a rate hike right now. Wage growth is still too slow, and millions of people who want to work full-time cannot.”

He goes on to say that the Fed is boosting rates based primarily on confidence data as opposed to evidence of real-world wage rises.

Michael S. Derby

9m

Stocks Extend Gains

Stocks extended gains Wednesday after the Federal Reserve raised short-term interest rates and penciled in two more quarter-point rate increases this year. The Dow Jones Industrial Average rose 100 points, or 0.5%, to 20937. The S&P 500 added 0.7% and Nasdaq Composite gained 0.7%. The Dow had been up about 35 points ahead of the decision. Meanwhile, in recent trading, the yield on the benchmark 10-year U.S. Treasury note was 2.586%, according to Tradeweb, compared with 2.595% Tuesday. Yields fall when bond prices rise.

11m

New York Fed Told to Press Forward With Balance-Sheet Reinvestment

As part of its decision to raise rates, the Fed has instructed the New York Fed on some technical issues to keep rates at desired levels.

As of Wednesday, the New York Fed is instructed to boost the interest rate paid on excess reserves to 1%, and the reverse repo borrowing rate to 0.75%. This is part of the corridor system of interest rate control practiced by the Fed right now, with the traditional target of the fed funds rate floating somewhere in between those levels.

The New York Fed is also ordered to carry on with buying securities to keep the Fed’s $4.5 trillion balance sheet steady. And it’s on this front the next big policy battle will happen. Many expect the Fed to stop or taper the so-called reinvestment process later this year, which would allow the central bank balance sheet to shrink passively.

Michael S. Derby

12m

How The Fed Sees the Economy Right Now

Information received since the Federal Open Market Committee met in February indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace. Job gains remained solid and the unemployment rate was little changed in recent months. Household spending has continued to rise moderately while business fixed investment appears to have firmed somewhat. Inflation has increased in recent quarters, moving close to the Committee’s 2 percent longer-run objective; excluding energy and food prices, inflation was little changed and continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
13m

The Full Statement

FRB: Press Release–Federal Reserve issues FOMC statement–March 15, 2017

The Federal Reserve Board of Governors in Washington DC.

READ FULL ARTICLE

16m

Fed Still Sees Three 2017 Rate Increases

Federal Reserve officials still expect to raise short-term interest rates three times this year and see no major changes in their economic outlook.

READ FULL ARTICLE

17m

HIGHLIGHTS

Fed Raises Interest Rates, Remains on Track to Keep Tightening

The Federal Reserve said it would raise short-term interest rates and remained on track to keep lifting them this year, signaling the central bank is moving into a new policy phase as the economy strengthens. Fed officials said Wednesday they would increase their benchmark federal-funds rate on Thursday by a quarter percentage point to a range between 0.75% and 1% and expects to continue raising it gradually if the economy performs in line with their forecast. As in December, officials penciled in three quarter-point rate increases this year, implying two more after the move this week.

READ FULL ARTICLE

19m

Growing Confidence in Inflation

The Federal Reserve is growing more confident in the return of 2% inflation. Officials believe inflation “will stabilize around 2% over the medium term,” the statement said. They also said monetary policy would manage to deliver “a sustained return to 2% inflation.” The statement also reiterated that the Fed views its inflation target as “symmetric,” a sign officials would tolerate inflation moving slightly above 2% for a little while. Inflation rose 1.9% in January from the previous year according to the Fed’s preferred metric.

19m

Meet The New Dots, Similar To The Old Dots

21m

HIGHLIGHTS

Fed Still Expects Three Rate Increases in 2017

Fed officials still forecast they will have increased the benchmark federal-funds rate a total of three times in quarter-percentage-point increments by the end of this year, and that’s including the increase enacted at its March meeting, according to their latest projections.

The median of officials’ forecasts released Wednesday implies rates will rise to 1.375% by the end of 2017, 2.125% by the end of 2018, and 3.000% by the end of 2019. That implies three quarter-percentage-point rate increases in 2017 and 2018, the same pace as officials projected in December.

For 2019, officials see three to four increases, which is a slightly higher projection than in December.

Harriet Torry

21m

Kashkari Dissent

As widely expected, Fed officials voted to raise their benchmark federal-funds rate a quarter percentage point on Wednesday to a range between 0.75% and 1.00%. Not everyone on the Fed’s rate-setting committee was on board: Minneapolis Fed President Neel Kashkari, who just joined the committee at the start of the year, voted against the action. Mr. Kashkari said he preferred to hold rates steady for now, underscoring his recent remarks that he was in no rush to move at the moment.

23m

HIGHLIGHTS

The Decision Is In — Fed Raises Rates by Quarter Point

The Fed has voted to raise its benchmark fed-funds rate by a quarter percentage point, to a range of 0.75% to 1%.

24m

Stocks Remain Up Slightly Ahead of Fed Decision

U.S. stocks held on to gains with a few minutes until the Fed’s policy statement. The Dow Jones Industrial Average was up 45 points, or 0.2%, while the S&P 500 added 0.4%. Buyers pressured the yield on benchmark 10-year Treasury notes down to 2.575% from 2.595% on Tuesday. Short-term rates sold off a bit, with the yield on 2-year Treasury rising to 1.393% from 1.380% a day ago. The WSJ Dollar Index, measuring the greenback against 16 others, was down 0.3%.

26m

If You’re Just Tuning In

The Fed will release its policy statement at 2 p.m. EDT, along with updated economic projections.

A rate increase is widely expected.

At 2:30 p.m., Chairwoman Janet Yellen will speak and take questions at her quarterly press conference.

Get excited!

28m

So There’s a Chance

The current probability of a Fed rate increase, via CME Group and fed-funds futures: 95.2%.

36m

Tarullo’s Last Dance

This will be the final policy meeting for Fed governor Daniel Tarullo, who is set to step down in early April. He’s long been an advocate for raising rates slowly, but he has mostly made his mark as the Fed’s point person for bank regulation.

Daniel Tarullo, Federal Reserve Regulatory Point Man, to Resign

The Federal Reserve’s lead architect of postcrisis financial regulations plans to resign this spring, giving President Donald Trump more freedom to remake the central bank and to accelerate a deregulatory agenda by putting his own appointees in charge of overseeing Wall Street.

READ FULL ARTICLE

1h

HIGHLIGHTS

A Timeline of How the Fed Fueled March Rate Rise Expecations

Given the near certainty of today’s Federal Reserve rate hike, it’s worth a look back at how central bankers clearly led the market to this conclusion. Feb. 28 was effectively the turning point. After several Fed officials indicated a March move was on the table, the leaders of the San Francisco and New York Fed banks, in separate appearances, offered up such strong guidance about a March rate rise that market odds of action moved up significantly. It was then up to officials like Chairwoman Janet Yellen and Stanley Fischer to drive it home, as they did on March 3. Then, Mr. Fischer puckishly remarked “If there has been a conscious effort” to boost expectations of a rate rise, “I’m about to join it.”

See more:

http://www.wsj.com/livecoverage/fed-decision-yellen-march-2017

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One Response to “Fed Raises Rates — Anticipates Two More Increases This Year — Yellen Holds Press Conference”

  1. daveyone1 Says:

    Reblogged this on World Peace Forum.

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