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US Federal Reserve begins unwinding stimulus and leaves interest rates on hold - live! US Federal Reserve begins unwinding stimulus and leaves interest rates on hold - live!
(35 minutes later)
8.34pm BST
20:34
Yellen expresses concern about the massive cyber attack at credit monitoring agency Equifax.
She calls it a “serious breach” and urges Americans to carefully monitor their credit reports.
WHOA: Fed Chief #janetyellen scolds #Equifax credit company for its data breach. Warns all customers to remain VIGILANT in monitoring credit
8.30pm BST
20:30
Q: What would it take for the Fed to start QE again?
Yellen gives a long answer, repeating that the Fed could potentially expand its balance sheet in future if there was a “material shock” to the economy, meaning interest rate cuts weren’t a strong enough responce.
Perhaps significantly, she talks about how “future policymakers” will have to decide this issue. A hint that she doesn’t expect to be renominated for a second term?
Yellen: "It will be up to future policy makers......"Sounds like a farewell statement...
8.29pm BST
20:29
Here’s a video clip of Janet Yellen’s (deservedly) stinging criticism of Wells Fargo:
Yellen: "I consider the behavior of Wells Fargo towards its customers to have been egregious and unacceptable." https://t.co/mmSQqCqih6 pic.twitter.com/urC34Dary4
8.22pm BST
20:22
Q: Will you take action against Wells Fargo over its huge misselling scandal?
Yellen roasts Wells Fargo, saying its actions are “Egregious and unacceptable”.
The Fed is working very hard to understand the root causes of Well Fargo’s problems, and decide the appropriate action.
[Background: a year ago, we learned that Wells Fargo staff had created 1.5m deposit accounts and 565,000 credit card accounts without customers’ consent, to meet their sales targets]
8.18pm BST
20:18
Q: Will there be operational problems when vice-chair Stanley Fischer steps down (early) next month? It will deprive the Federal Reserve of its quorum of four governors.
Yellen pays tribute to Fischer’s contribution to the Fed, saying she appreciated his “wise council and friendship”.
She says the Fed can carry out its duties with only three governors, but hopes that Congress will approve some new appointees to the Fed board.
Yellen says she hopes that Randy Quarles, Trump's nominee for vice chair of supervision, will be confirmed by the Senate.
8.15pm BST
20:15
Asked about financial regulation, Yellen says it’s important that reforms put in place since the crisis stay put.
She adds that regulations could be ‘tailored’ to avoid undue burden on the sector.
Yellen: We want to -- and Congress should -- tailor regulations to the risk posed by different kinds of banks.
8.12pm BST
20:12
Yellen: I've not met with Trump recently
Ah, the elephant in the room.....
Q: Your current term expires in February 2018 - Have you discussed the situation with Donald Trump, or had any thoughts about your plans?
Janet Yellen says she intends to serve her current tern, and will not comment on whether she wants to stays on beyond that.
She has not had a further meeting with Trump, since one early meeting shortly after he became president.
Breaking: Fed chair Janet Yellen says she has NOT met with President Trump to discuss the next Fed chair. She won't say if she wants to stay
As clock ticks on #Yellen's term as chair, she says she hasn't met Trump since her last meeting early in his presidency
8.06pm BST
20:06
Refreshingly, Janet Yellen says the Fed doesn’t know why inflation is below target this year.
We need to “figures out” if the factors are persistent of transitory, she adds.
Yellen says there's been a "miss" this year on inflation target and not sure why
8.02pm BST8.02pm BST
20:0220:02
Here’s Tom Stevenson, investment director for personal investing at Fidelity International, on the Fed’s balance sheet reduction plan:Here’s Tom Stevenson, investment director for personal investing at Fidelity International, on the Fed’s balance sheet reduction plan:
As expected, the Fed has fleshed out its plans for reining in the size of its balance sheet. This has ballooned since the financial crisis on the back of America’s massive quantitative easing stimulus programme.As expected, the Fed has fleshed out its plans for reining in the size of its balance sheet. This has ballooned since the financial crisis on the back of America’s massive quantitative easing stimulus programme.
The balance sheet has expanded to $4.5trn since the financial crisis. The plan is to start reducing it from next month and to progressively accelerate the rate at which bonds are returned to the public market. The Fed hopes that by telegraphing its $1trn to $2trn taper, it can avoid unsettling bond and equity markets.The balance sheet has expanded to $4.5trn since the financial crisis. The plan is to start reducing it from next month and to progressively accelerate the rate at which bonds are returned to the public market. The Fed hopes that by telegraphing its $1trn to $2trn taper, it can avoid unsettling bond and equity markets.
8.01pm BST8.01pm BST
20:0120:01
Yellen reminds the press conference that the Fed has now raised interest rates four times in this cycle, and it still thinks the recovery is on a “strong track”.Yellen reminds the press conference that the Fed has now raised interest rates four times in this cycle, and it still thinks the recovery is on a “strong track”.
7.59pm BST7.59pm BST
19:5919:59
Q: The Fed is locked into reducing its balance sheet, and raising interest rates in a gradual fashion. So what will you do if economic conditions don’t turn out as you expect?Q: The Fed is locked into reducing its balance sheet, and raising interest rates in a gradual fashion. So what will you do if economic conditions don’t turn out as you expect?
Yellen denies that the Fed is ‘locked in’ to a particular path. We are assessing incoming data, and these plans are subject to change.Yellen denies that the Fed is ‘locked in’ to a particular path. We are assessing incoming data, and these plans are subject to change.
What won’t change, though, is our commitment to delivering price stability and full employment, she adds.What won’t change, though, is our commitment to delivering price stability and full employment, she adds.
7.57pm BST7.57pm BST
19:5719:57
Yellen says that the Fed could “stop its balance sheet rolloff” in future, if adjusting interest rates is “insufficient” to respond to changes to the economic outlook.Yellen says that the Fed could “stop its balance sheet rolloff” in future, if adjusting interest rates is “insufficient” to respond to changes to the economic outlook.
7.54pm BST7.54pm BST
19:5419:54
Q: Is the Fed concerned that markets are at, or close to, record highs?Q: Is the Fed concerned that markets are at, or close to, record highs?
Yellen replies that it’s not easy to see how asset prices will affect the economic outlook, but the Fed is “taking account of asset prices when setting monetary policy”.Yellen replies that it’s not easy to see how asset prices will affect the economic outlook, but the Fed is “taking account of asset prices when setting monetary policy”.
Question for Yellen about "buoyant" stock market/other rising asset prices & whether it concerns Fed. Response? To sort of dodge question.Question for Yellen about "buoyant" stock market/other rising asset prices & whether it concerns Fed. Response? To sort of dodge question.
7.51pm BST7.51pm BST
19:5119:51
Onto questions, and the first one is a zinger.Onto questions, and the first one is a zinger.
Q: Why the Fed is unwinding its balance sheet when core inflation is consistently below target, and the unemployment rate for Black Americans is 8% (much higher than the 4.4% national average).Q: Why the Fed is unwinding its balance sheet when core inflation is consistently below target, and the unemployment rate for Black Americans is 8% (much higher than the 4.4% national average).
Yellen replies that it is a “concern” that inflation is below the 2% target. The Fed still believes it will rise, but will adjust policy if needed.Yellen replies that it is a “concern” that inflation is below the 2% target. The Fed still believes it will rise, but will adjust policy if needed.
Asked about sacrificing black/minority employment gains for low inflation, Yellen responded with a recitation of everything on Fed's mindAsked about sacrificing black/minority employment gains for low inflation, Yellen responded with a recitation of everything on Fed's mind
7.48pm BST7.48pm BST
19:4819:48
Yellen repeats that the Fed’s balance sheet will be shrunk gradually and predictably.Yellen repeats that the Fed’s balance sheet will be shrunk gradually and predictably.
It will start by cutting its holdings by up to $10bn per month this autumn; a small change designed to help the markets adjust.It will start by cutting its holdings by up to $10bn per month this autumn; a small change designed to help the markets adjust.
This cap will rise to $50bn per month by next autumn.This cap will rise to $50bn per month by next autumn.
Janet Yellen says "We do NOT plan on making adjustments to our balance sheet normalization program." pic.twitter.com/WWy9DaCR5aJanet Yellen says "We do NOT plan on making adjustments to our balance sheet normalization program." pic.twitter.com/WWy9DaCR5a
But....she also flags up that the Fed could adjust its balance sheet in future, if circumstances demanded it.But....she also flags up that the Fed could adjust its balance sheet in future, if circumstances demanded it.
UpdatedUpdated
at 7.55pm BSTat 7.55pm BST
7.42pm BST7.42pm BST
19:4219:42
Policy is not on a preset cause, says Yellen - a reminder to the markets that events could yet force the Fed to chance course.Policy is not on a preset cause, says Yellen - a reminder to the markets that events could yet force the Fed to chance course.
7.40pm BST7.40pm BST
19:4019:40
On interest rates, Yellen says the Federal Fund Rate won’t have to rise much further to get back to a ‘neutral stance’.On interest rates, Yellen says the Federal Fund Rate won’t have to rise much further to get back to a ‘neutral stance’.
7.39pm BST
19:39
Yellen warns that US economic growth in the current quarter will be hurt by the recent hurricanes that battered Florida and Texas (as well as the Caribbean).
Inflation will also be pushed higher, temporarily, because gasoline has become pricier.
However, this won’t “materially” affect the long-term path of the economy, she adds.
Yellen emphasis on near-term hit to data from hurricanes seems like pre-emptive indication a few bad data points won't alter rate hike plans
Yellen also expresses sympathy, on behalf of the Fed, for those who have suffered from Irma and Harvey.
Fed's Yellen expresses her condolences to all those Americans who have been affected by the recent hurricanes in Texas and Florida.
7.36pm BST
19:36
Janet Yellen's press conference begins
Over in Washington, Federal Reserve chair Janet Yellen has sat down to face the press and explain today’s decisions.
She starts by predicting that the US economy “will continue to expand over the next few years”, and that the Fed’s accommodative monetary policy stance will help create more jobs.
Yellen adds:
We expect the job market will strengthen somewhat further’
She says the Fed’s balance sheet reduction plan will be gradual and predictable.
7.32pm BST
19:32
Explainer: What the Fed will do to its balance sheet
What does ‘reducing the Fed’s balance sheet’ mean in practice?
Well... once the financial crisis stuck, the US central bank created more than a trillion of new dollars to buy American government debt, and bonds backed by mortgages.
This chart, from Bloomberg, reminds us how the Fed unleashed three quantitative easing programme in an attempt to prop up growth, fight unemployment and keep inflation higher.
So now, the Fed is planning to cut back, by cutting the amount of assets on its books.
Those QE programmes drove asset prices to record levels, such as bond prices and equities.
Kully Samra, UK managing director of Charles Schwab, warns that markets could wobble once the Fed’s plan gets underway.
Robust fundamental data and solid corporate earnings should allow the bull market to continue, but political, fiscal and monetary uncertainties still present risks.
The Fed’s announcement today to start unwinding the balance sheet has already been priced in by markets, but we continue to believe the Fed’s “quantitative tightening” could be the cause of some heightened volatility, especially as the impact on the real economy remains largely unknown.”
Updated
at 7.51pm BST
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} pic.twitter.com/B08GKDadGe
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