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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 - as it happened | |
| (35 minutes later) | |
| 9.40pm BST | |
| 21:40 | |
| Closing post | |
| Right, time to wrap up. Here’s a quick summary. | |
| Almost a decade after the financial world plunged into its biggest crisis in generations, the US Federal Reserve has taken the landmark decision to start unwinding some of the stimulus it created to ward off a second Great Depression. | |
| The Fed will start cutting its $4.5 trillion balance sheet in October, initially by just $10bn per month. Fed chair Janet Yellen said the normalisation process would be gradual and predictable. | |
| Policymakers also left US interest rates unchanged, at 1.25% to 1.5%. The Fed committee expects to raise borrowing costs once more time this year, followed by three raises in 2018. | |
| During her press conference, Yellen admitted that the Fed doesn’t really understand why inflation hasn’t returned to target. She also predicted that the US economy would suffer short-term damage from Hurricanes Irma, Harvey and Maria. | |
| But there was no new insight into Yellen’s future; the Fed chair hasn’t met with president Trump recently, and refused to say if she wanted to serve a second term once her first stint ends in February 2018. | |
| Investors are taking the Fed’s decisions well, with shares finishing a little higher in New York. | |
| The US dollar has jumped, while US government debt has weakened, as investors brace for the Fed’s policies to hit the markets. | |
| Banks stocks rally as Fed aims for one more hike in 2017. Dollar rebounds and yields higher on hawkish dots https://t.co/jirBcFOVHz pic.twitter.com/ikNK31rA6y | |
| From New York, my colleague Dominic Rushe sums up the day: | |
| The Federal Reserve has announced it will begin the great unwinding of the gargantuan stimulus programme it began close to a decade ago in the teeth of the worst recession in living memory. | |
| As widely expected, the Fed voted to start reducing its portfolio starting in October, and kept interest rates at a range of 1% to 1.25%. | |
| The move, announced after a two-day meeting by Fed officials, will start the gradual reduction of the central bank’s $4.5tn portfolio of bonds and other securities, bought to keep interest rates close to zero in an attempt to kickstart the economy. | |
| “The basic message here is that US economic performance has been good,” Fed chair Janet Yellen said at a press conference. The Fed’s decision had been made because “we feel the US economy is performing well” but she added the Fed could reverse course if conditions changed.... | |
| Here’s Dom’s full story: | |
| That’s all for today. Thanks for reading and commenting. GW and NF | |
| 9.23pm BST | |
| 21:23 | |
| Markets close at fresh record highs | |
| Wall Street has taken today’s news in its stride. | |
| The Dow Jones industrial average and the S&P 500 share indices have both closed slightly higher, at new record highs. | |
| But... short-term US government debt continues to sell off. The yield (interest rate) on two-year Treasury bills is pushing higher, following the news that the Fed will trim its balance sheet. | |
| 9.03pm BST | 9.03pm BST |
| 21:03 | 21:03 |
| What the experts say | What the experts say |
| Reaction to the Fed’s announcement keeps flooding in. | Reaction to the Fed’s announcement keeps flooding in. |
| Geoffrey Yu of UBS Wealth Management predicts the Fed will unwind its balance sheet slowly, as it takes a step into the unknown. | Geoffrey Yu of UBS Wealth Management predicts the Fed will unwind its balance sheet slowly, as it takes a step into the unknown. |
| It has taken a decade for policymakers to begin to understand the effects of quantitative easing and with that debate still raging, markets will need to absorb the impact of its reversal. | It has taken a decade for policymakers to begin to understand the effects of quantitative easing and with that debate still raging, markets will need to absorb the impact of its reversal. |
| Because of the uncertainty this could entail, we expect the Fed to adopt a ‘do no harm’ approach. | Because of the uncertainty this could entail, we expect the Fed to adopt a ‘do no harm’ approach. |
| The fact that the Fed is even willing to begin this process indicates their confidence in the direction of the US economy and markets should not be perturbed by any new policy approach. | The fact that the Fed is even willing to begin this process indicates their confidence in the direction of the US economy and markets should not be perturbed by any new policy approach. |
| Sophia Ferguson of State Street Global Advisors says the Fed will be watching economic data closely, especially following recent hurricane damage: | Sophia Ferguson of State Street Global Advisors says the Fed will be watching economic data closely, especially following recent hurricane damage: |
| In spite of record low unemployment and increasingly loose financial conditions, benign wage growth kept hawkish members of the committee grounded, with a downward drift in the longer-run expected policy rate path as represented by the dot plots. | In spite of record low unemployment and increasingly loose financial conditions, benign wage growth kept hawkish members of the committee grounded, with a downward drift in the longer-run expected policy rate path as represented by the dot plots. |
| With 11 out of 16 participants calling for another rate hike before the end of the year, the decision to leave the cash rate unchanged at 1.25% provides a welcome respite for the FOMC to evaluate the economic data over the coming weeks and months; the pause reduces the risk of pre-emptively removing policy accommodation, yet leaves ample fuel in the tank should inflation start to accelerate more aggressively than forecast in the second half of the year. | With 11 out of 16 participants calling for another rate hike before the end of the year, the decision to leave the cash rate unchanged at 1.25% provides a welcome respite for the FOMC to evaluate the economic data over the coming weeks and months; the pause reduces the risk of pre-emptively removing policy accommodation, yet leaves ample fuel in the tank should inflation start to accelerate more aggressively than forecast in the second half of the year. |
| James McCann of Aberdeen Asset Management says the Fed has “fired the starting gun” on unwinding its QE programme. | James McCann of Aberdeen Asset Management says the Fed has “fired the starting gun” on unwinding its QE programme. |
| This is set to be a marathon, rather than a sprint, with a slow-but-steady runoff in Treasury and Mortgage Backed Security holdings to begin in October. This step reflects rising confidence that the recovery is sufficiently durable to withstand a slow withdrawal of emergency policy measures, a full ten years after the financial crisis struck. | This is set to be a marathon, rather than a sprint, with a slow-but-steady runoff in Treasury and Mortgage Backed Security holdings to begin in October. This step reflects rising confidence that the recovery is sufficiently durable to withstand a slow withdrawal of emergency policy measures, a full ten years after the financial crisis struck. |
| Nicholas Wall of Old Mutual Global Investors, says the Fed wanted to get its balance sheet reduction underway before the committee is shaken up next year (possibly with a new Fed chair). | Nicholas Wall of Old Mutual Global Investors, says the Fed wanted to get its balance sheet reduction underway before the committee is shaken up next year (possibly with a new Fed chair). |
| The strong economy and loose financial conditions also gives the central bank confidence that the market will be able to handle the extra bond issuance. | The strong economy and loose financial conditions also gives the central bank confidence that the market will be able to handle the extra bond issuance. |
| Rick Rieder of asset management giant BlackRock predicts the European Central Bank will slow the pace of its own stimulus programme soon (that’s not the same as actually unwinding it, though) | Rick Rieder of asset management giant BlackRock predicts the European Central Bank will slow the pace of its own stimulus programme soon (that’s not the same as actually unwinding it, though) |
| Now that the #Fed has introduced its balance sheet reduction program, look for tapering in QE implementation from the ECB early next year | Now that the #Fed has introduced its balance sheet reduction program, look for tapering in QE implementation from the ECB early next year |
| Updated | Updated |
| at 9.14pm BST | at 9.14pm BST |
| 8.53pm BST | 8.53pm BST |
| 20:53 | 20:53 |
| Back in the markets, investors now believe there’s a 60% chance of a US interest rate rise in December, to 1.5%. | Back in the markets, investors now believe there’s a 60% chance of a US interest rate rise in December, to 1.5%. |
| That’s up from 50% before today’s announcement. | That’s up from 50% before today’s announcement. |
| Markets are now pricing in more than a 60% probability of a December #Fed hike (up from approx 50% before the #FOMC meeting) #EURUSD pic.twitter.com/lCoEX9eK5d | Markets are now pricing in more than a 60% probability of a December #Fed hike (up from approx 50% before the #FOMC meeting) #EURUSD pic.twitter.com/lCoEX9eK5d |
| 8.40pm BST | 8.40pm BST |
| 20:40 | 20:40 |
| And finally, a question that gets to the heart of the matter.... | And finally, a question that gets to the heart of the matter.... |
| Q: Are you bothered that financial conditions are actually looser than before you raised interest rates four times? | Q: Are you bothered that financial conditions are actually looser than before you raised interest rates four times? |
| Yellen says the Federal Reserve has tightened policy since late 2015 because the US economy has been recovering, and the labor market has strengthened. | Yellen says the Federal Reserve has tightened policy since late 2015 because the US economy has been recovering, and the labor market has strengthened. |
| There are risks on both sides to our objectives, she warns. Tighten too early, and we risk hurting the economy and keeping inflation permanently low. | There are risks on both sides to our objectives, she warns. Tighten too early, and we risk hurting the economy and keeping inflation permanently low. |
| But wait too long, and we risk the economy overheating. That would ultimately force us to raise rates fast, leading to a recession. | But wait too long, and we risk the economy overheating. That would ultimately force us to raise rates fast, leading to a recession. |
| So the Fed is treading a careful path as we aim to hit our mandate, she concludes. | So the Fed is treading a careful path as we aim to hit our mandate, she concludes. |
| And that’s the end of the press conference. Reaction to follow..... | And that’s the end of the press conference. Reaction to follow..... |
| 8.34pm BST | 8.34pm BST |
| 20:34 | 20:34 |
| Yellen expresses concern about the massive cyber attack at credit monitoring agency Equifax. | 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. | 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 | WHOA: Fed Chief #janetyellen scolds #Equifax credit company for its data breach. Warns all customers to remain VIGILANT in monitoring credit |
| 8.30pm BST | 8.30pm BST |
| 20:30 | 20:30 |
| Q: What would it take for the Fed to start QE again? | 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. | 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? | 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... | Yellen: "It will be up to future policy makers......"Sounds like a farewell statement... |
| 8.29pm BST | 8.29pm BST |
| 20:29 | 20:29 |
| Here’s a video clip of Janet Yellen’s (deservedly) stinging criticism of Wells Fargo: | 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 | 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 | 8.22pm BST |
| 20:22 | 20:22 |
| Q: Will you take action against Wells Fargo over its huge misselling scandal? | Q: Will you take action against Wells Fargo over its huge misselling scandal? |
| Yellen roasts Wells Fargo, saying its actions are “Egregious and unacceptable”. | 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. | 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] | [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 | 8.18pm BST |
| 20:18 | 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. | 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”. | 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. | 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. | Yellen says she hopes that Randy Quarles, Trump's nominee for vice chair of supervision, will be confirmed by the Senate. |
| 8.15pm BST | 8.15pm BST |
| 20:15 | 20:15 |
| Asked about financial regulation, Yellen says it’s important that reforms put in place since the crisis stay put. | 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. | 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. | Yellen: We want to -- and Congress should -- tailor regulations to the risk posed by different kinds of banks. |
| 8.12pm BST | 8.12pm BST |
| 20:12 | 20:12 |
| Yellen: I've not met with Trump recently | Yellen: I've not met with Trump recently |
| Ah, the elephant in the room..... | 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? | 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. | 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. | 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 | 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 | As clock ticks on #Yellen's term as chair, she says she hasn't met Trump since her last meeting early in his presidency |