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You can find the current article at its original source at https://www.theguardian.com/business/live/2017/sep/20/us-federal-reserve-decision-janet-yellen-markets-uk-retail-business-live
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US Federal Reserve begins unwinding stimulus and leaves interest rates on hold - live! | |
(35 minutes later) | |
7.24pm BST | |
19:24 | |
Wall Street has reacted calmly to the news that the Fed will start unwinding its balance sheet in October. | |
The main stock indices have dipped slightly, with the Dow down 0.25% and the S&P 500 losing 0.1%. | |
Cue the sarcasm: | |
The S&P is down 5 points. Guess all the bears who said stocks were propped up all this time by QE were right! | |
7.21pm BST | |
19:21 | |
Skimming through the Fed statement, it appears that policymakers are still confident that the US economy is recovering. | |
Here’s a flavour: | |
Information received since the Federal Open Market Committee met in July indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year. | |
Job gains have remained solid in recent months, and the unemployment rate has stayed low. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. | |
On a 12-month basis, overall inflation and the measure excluding food and energy prices have declined this year and are running below 2 percent. | |
Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance. | |
Fed: touch more hawkish than I'd have expected. | |
7.18pm BST | |
19:18 | |
The dollar has jumped by 0.4%, reversing its weakness before the Fed’s announcement. | |
Traders are reacting to the news that the Fed still expects to raise interest rates once more this year, and three times in 2018. | |
Dollar surging: Fed kept rates unchanged and balance sheet runoff starts Oct. Credit Suisse: FOMC Could Upend broad USD negative view #fx pic.twitter.com/nw2UAKm4k2 | |
7.14pm BST | |
19:14 | |
In the markets, the yield on short-term US debt has jumped, meaning bond prices have fallen. | |
US 2-year Treasury yield hits more than two-month high after Fed announcement https://t.co/xfVVsynLAw pic.twitter.com/h26rkNEK4m | |
7.11pm BST | |
19:11 | |
The Fed also flags up the damage suffered by hurricanes in recent weeks. | |
It predicts inflation could push higher in the short term, but hopes the US economy will bounce back: | |
Today’s statement says: | |
Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship. | |
Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. | |
Fed: Hurricanes unlikely to alter economy's course medium term. | |
Updated | |
at 7.12pm BST | |
7.10pm BST | |
19:10 | |
Importantly, some Fed committee members have become more dovish about the path of interest rates in 2018. | |
The new Dot Plot (in yellow) shows that two hawkish policymakers have pulled their horns in (one was expecting rates to hit 3% next year!) | |
There’s also very little consensus about where rates will be in 2019.... | |
Changes in the DOTS: {DOTS | |
7.02pm BST | |
19:02 | |
Fed to start shrinking its balance sheet in October | |
Boom! The Fed says it will start shrinking its balance sheet in October. | |
That means it will beginning the task of unwinding the stimulus it injected into the US economy once the financial crisis began. | |
Updated | |
at 7.03pm BST | |
7.01pm BST | |
19:01 | |
US Federal Reserve Decision | |
Breaking! The Federal Reserve has left interest rates unchanged at today’s meeting, at up to 1.25%. | |
Fed policymakers are also sticking with their prediction of one more rate hike this year. | |
More to follow... | |
7.00pm BST | |
19:00 | |
Here we go....#Fed | |
6.57pm BST | |
18:57 | |
The dollar is dipping slightly as traders brace for the Fed statement to hit the wires. | |
This has pushed the pound up to $1.359, up 0.8% of a cent today. | |
6.47pm BST | 6.47pm BST |
18:47 | 18:47 |
Oliver Jones of Capital Economics predicts that the Fed will sound more dovish about interest rates today. | Oliver Jones of Capital Economics predicts that the Fed will sound more dovish about interest rates today. |
He suspects they will drop the notion of another rate hike in 2017, and push it into 2018. | He suspects they will drop the notion of another rate hike in 2017, and push it into 2018. |
Jones writes: | Jones writes: |
While the federal funds rate is almost certain to stay on hold on this occasion, updates to FOMC members’ median forecasts – which are currently for one more rate hike this year and three further three hikes in 2018 – will be closely scrutinised as usual. | While the federal funds rate is almost certain to stay on hold on this occasion, updates to FOMC members’ median forecasts – which are currently for one more rate hike this year and three further three hikes in 2018 – will be closely scrutinised as usual. |
Although we no longer expect the Fed to raise rates again in 2017, we are still expecting four rate hikes in 2018 as inflation rebounds. | Although we no longer expect the Fed to raise rates again in 2017, we are still expecting four rate hikes in 2018 as inflation rebounds. |
6.35pm BST | 6.35pm BST |
18:35 | 18:35 |
Wall Street is becalmed, with less than 30 minutes until the Fed announcement, which is followed by Janet Yellen’s press conference. | Wall Street is becalmed, with less than 30 minutes until the Fed announcement, which is followed by Janet Yellen’s press conference. |
The Dow Jones industrial average is up 2 points, or a measly 0.01%, having hit a record high last night. | The Dow Jones industrial average is up 2 points, or a measly 0.01%, having hit a record high last night. |
6.20pm BST | 6.20pm BST |
18:20 | 18:20 |
Do play along with Fed Bingo at home, or in the office. | Do play along with Fed Bingo at home, or in the office. |
it's #Fed Bingo day. Statement and press conference both count. Your caller is Janet #Yellen . Eyes down for a full house! pic.twitter.com/RUWmICwJW4 | it's #Fed Bingo day. Statement and press conference both count. Your caller is Janet #Yellen . Eyes down for a full house! pic.twitter.com/RUWmICwJW4 |
6.15pm BST | 6.15pm BST |
18:15 | 18:15 |
Fingers crossed, and seatbelts buckled, please.... | Fingers crossed, and seatbelts buckled, please.... |
We've had 13 Fed tightening cycles, with 10 ending in recession, and 3 soft landings. "So let's pray for a soft landing" - Rosenberg, @CNBC | We've had 13 Fed tightening cycles, with 10 ending in recession, and 3 soft landings. "So let's pray for a soft landing" - Rosenberg, @CNBC |
6.14pm BST | 6.14pm BST |
18:14 | 18:14 |
What to watch for from the Fed today | What to watch for from the Fed today |
Today’s meeting of the Federal Open Market Committee is one of the most eagerly anticipated in a while. But what will Wall Street, the City, and investors around the world be looking for - and what will it mean for the rest of us? | Today’s meeting of the Federal Open Market Committee is one of the most eagerly anticipated in a while. But what will Wall Street, the City, and investors around the world be looking for - and what will it mean for the rest of us? |
1) Will the Fed raise interest rates today? Spoiler alert: this is seen as very unlikely. We’ve already seen two US interest rate rises this year, and American inflation probably isn’t bubbling away enough to justify a third today. | 1) Will the Fed raise interest rates today? Spoiler alert: this is seen as very unlikely. We’ve already seen two US interest rate rises this year, and American inflation probably isn’t bubbling away enough to justify a third today. |
2) So when will rates go up? Previously, the Fed has predicted it will raise borrowing costs three times in 2017, and it has already hiked in March and June. | 2) So when will rates go up? Previously, the Fed has predicted it will raise borrowing costs three times in 2017, and it has already hiked in March and June. |
Today, it will release a new Dot Plot, showing how policymakers expect borrowing costs to move. If they don’t change 2017’s dots, and they don’t hike today, then a December hike would remain possible (but not certain). | Today, it will release a new Dot Plot, showing how policymakers expect borrowing costs to move. If they don’t change 2017’s dots, and they don’t hike today, then a December hike would remain possible (but not certain). |
Odds of another Fed rate hike this year now about 50:50 ahead of FOMC meeting. pic.twitter.com/7i1ZdbWpkC | Odds of another Fed rate hike this year now about 50:50 ahead of FOMC meeting. pic.twitter.com/7i1ZdbWpkC |
Consensus anticipates #Fed normalization w/unchanged ’17 dots. ’18 & ’19 dots could shift lower while language may turn slightly more dovish pic.twitter.com/HXSCpTayLE | Consensus anticipates #Fed normalization w/unchanged ’17 dots. ’18 & ’19 dots could shift lower while language may turn slightly more dovish pic.twitter.com/HXSCpTayLE |
3) Is it time to unwind the stimulus, and how? The big news from today’s meeting will probably centre on the Fed’s plans to normalise monetary policy and trim its $2.45 trillion balance sheet. | 3) Is it time to unwind the stimulus, and how? The big news from today’s meeting will probably centre on the Fed’s plans to normalise monetary policy and trim its $2.45 trillion balance sheet. |
That balance sheet swelled during the Fed’s various QE stimulus programmes, mopping up hundreds of billions of dollars of government and mortgage-backed bonds. | That balance sheet swelled during the Fed’s various QE stimulus programmes, mopping up hundreds of billions of dollars of government and mortgage-backed bonds. |
It's go time for the Fed https://t.co/18DI9StR1J pic.twitter.com/Ib8IkF160b | It's go time for the Fed https://t.co/18DI9StR1J pic.twitter.com/Ib8IkF160b |
Economists predict that the Fed will announce that it will start unwinding this programme. But it may be reluctant to move fast. One option is to stop buying new bonds when existing debt matures. | Economists predict that the Fed will announce that it will start unwinding this programme. But it may be reluctant to move fast. One option is to stop buying new bonds when existing debt matures. |
The Fed is the first of the Big Four central banks to reach this point, so it is treading a path which the ECB, the Bank of Japan and the Bank of England will hope to follow. | The Fed is the first of the Big Four central banks to reach this point, so it is treading a path which the ECB, the Bank of Japan and the Bank of England will hope to follow. |
4) What’s the hurricane damage? New economic forecasts will be released today, which may attempt to quantify the impact of hurricanes Harvey and Irma. | 4) What’s the hurricane damage? New economic forecasts will be released today, which may attempt to quantify the impact of hurricanes Harvey and Irma. |
5) Yellen’s future in focus. Janet Yellen’s first term as Fed chair ends in early 2018. Is she considering running again, or ruling herself out following criticism from Donald Trump? She recently breakfasted with the president’s elder daughter, Ivanka, so reporters will want to hear Yellen’s thinking. | 5) Yellen’s future in focus. Janet Yellen’s first term as Fed chair ends in early 2018. Is she considering running again, or ruling herself out following criticism from Donald Trump? She recently breakfasted with the president’s elder daughter, Ivanka, so reporters will want to hear Yellen’s thinking. |
6) How do the markets take it? Investors seem remarkably relaxed about the prospect of QE being unwound, with markets at record highs. But might they have a change of heart when the deed is done? Loose monetary policy has driven asset prices higher for years, so withdrawing it could dent spirits.... | 6) How do the markets take it? Investors seem remarkably relaxed about the prospect of QE being unwound, with markets at record highs. But might they have a change of heart when the deed is done? Loose monetary policy has driven asset prices higher for years, so withdrawing it could dent spirits.... |
Updated | Updated |
at 6.22pm BST | at 6.22pm BST |
6.06pm BST | 6.06pm BST |
18:06 | 18:06 |
In one hour (18:00 GMT), the Federal Reserve will announce its Interest Rate Decision. The previous value was 1.25% pic.twitter.com/vgqqKG6m4G | In one hour (18:00 GMT), the Federal Reserve will announce its Interest Rate Decision. The previous value was 1.25% pic.twitter.com/vgqqKG6m4G |
5.06pm BST | 5.06pm BST |
17:06 | 17:06 |
European markets flat ahead of Fed | European markets flat ahead of Fed |
World markets are hovering around new highs, with the MSCI All Country World Index up another 0.09% to 487.82. But overall investors are - mostly - sitting on their hands ahead of the latest US Federal Reserve interest rate decision, due in just under two hours. | World markets are hovering around new highs, with the MSCI All Country World Index up another 0.09% to 487.82. But overall investors are - mostly - sitting on their hands ahead of the latest US Federal Reserve interest rate decision, due in just under two hours. |
The exception, as previously mentioned, is the Spanish market, which has been rattled by the tensions in Spain surrounding a proposed independence referendum for Catalonia. The final scores showed: | The exception, as previously mentioned, is the Spanish market, which has been rattled by the tensions in Spain surrounding a proposed independence referendum for Catalonia. The final scores showed: |
The FTSE 100 finished down 3.3 points or 0.05% at 7271.95 | The FTSE 100 finished down 3.3 points or 0.05% at 7271.95 |
Germany’s Dax edged up 0.06% to 12,569.17 | Germany’s Dax edged up 0.06% to 12,569.17 |
France’s Cac climbed 0.08% to 5241.66 | France’s Cac climbed 0.08% to 5241.66 |
Italy’s FTSE MIB fell 0.31% to 22,355.58 | Italy’s FTSE MIB fell 0.31% to 22,355.58 |
Spain’s Ibex ended 0.83% lower at 10,292.1 | Spain’s Ibex ended 0.83% lower at 10,292.1 |
In Greece, the Athens market dropped 0.64% to 757.98 | In Greece, the Athens market dropped 0.64% to 757.98 |
On Wall Street, the Dow Jones Industrial Average is currently up 0.1% at 22,392. | On Wall Street, the Dow Jones Industrial Average is currently up 0.1% at 22,392. |
Updated | Updated |
at 5.35pm BST | at 5.35pm BST |