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Stock market falls sharply after Federal Reserve raises interest rates – business live Federal Reserve chair: Trump won't stop us doing the right thing - business live
(35 minutes later)
Chair Powell is having quite an impact....
To my earlier point, the markets aren’t loving this... pic.twitter.com/pBbJCGu12n
The sell-off is gathering pace!
BREAKING: Dow slides more than 400 points as Fed chair Powell delivers news conference after hiking rates; index was earlier up more than 380 pointshttps://t.co/SPz0hnyZMd pic.twitter.com/ue5EJSKkRT
Next year, the Federal Reserve will hold a press conference after every meeting (rather than every other meeting).
That will be a “big gain” for communication, Jerome Powell says.
It also means that the Fed could raise rates more easily at any of its eight meetings (rather than resisting policy changes at non-press conference meetings)
Q: Donald Trump wants you to ‘feel the markets’, so what feelings are you getting?
Powell plays down the idea that he should be fixated on the stock exchange.
What matters to the economy is changes in a range of markets. A little volatility doesn’t leave a mark, he adds.
Stocks turn deeper into the red. Dow now down 250 points as Powell not as dovish as expected. pic.twitter.com/sm6aZjcowM
If you speak to American companies, you hear that they’re worried about growth prospects, Jerome Powell says.
Stocks are now falling sharply in New York.
The Dow is now down 1%, or 256 points, having been UP 300 points before the Fed’s announcement.
Q: Are you worried about Donald Trump’s statements, and tweets, about the Fed?
I’m not worried, Powell replies; he knows everyone at the Fed will keep on doing their job.
He explains that the Fed speaks to hundreds of people, and looks at masses of data, before setting monetary policy.
Q: How can you tell if the Fed has become a drag on the economy?
Powell says the Fed expects decent growth in the US economy next year, of between 2% and 2.5%. So it’ll be watching the data closely to see if that plays out.
Fed Chair Jerome Powell says "political considerations" have played no role in Federal Reserve policy https://t.co/2t6GGXtPJy pic.twitter.com/jbSYBSwOpL
Q: How did the tightening in financial conditions, trade tensions, and criticism from Donald Trump affect today’s decision?
Powell says the Fed took financial conditions into account, and will be watching the situation.
On trade, there is ‘broad’ concern among businesses over the strength of the global economy.
And on the president’s criticism of the Fed, Powell insists firmly that Trump has no impact at all!
Political considerations play no role in our work, Powell insists.
The Fed has a mandate from Congress, and it has the tools and the independence it needs to do the job.
We at the Fed are absolutely committed to that mission, and nothing will deter us from doing what we think is the right thing to do, Powell declares.
There is a “fairly high degree of uncertainty over the path and destination of any further interest rate increases” Powell reiterates.
Translation: Those two hikes expected in 2019 are NOT set in concrete.
Onto questions, starting with one about recent softening in US inflation data.
Chair Powell says this gives the Fed the flexibility to be patient.
Jay Powell is now explaining that the Fed’s future decisions aren’t pre-determined.
Any future policy changes will depend on the data, he says.
Fed's #Powell going to some lengths to reiterate again and again that they will respond to data...there is not a plan...rate hikes are not predetermined
The US dollar is bouncing around as Powell speaks....
Powell says most of his colleagues expect the US economy to perform well in the coming year.
But they have cut their inflation projections, due to recent ‘tightening in financial conditions’ and slower growth abroad (the eurozone, for example, only grew by 0.2% in the last quarter, with Germany contracting)
Jay Powell says that the Fed has lowered its forecast for economic growth next year. That’s why it now expects two more interest rate hikes in 2019, down from 3 before.
The Fed chair has arrived, to explain why US interest rates are being raised for the fourth time this year - and the 9th time since the financial crisis ended.The Fed chair has arrived, to explain why US interest rates are being raised for the fourth time this year - and the 9th time since the financial crisis ended.
Jerome Powell says the US economy has been performing well over the last three months, with jobs being created, wages up, and inflation stable.Jerome Powell says the US economy has been performing well over the last three months, with jobs being created, wages up, and inflation stable.
But there are also signs of softening, as the US economy faces new challenges such as slower growth in some other countries, Powell continues....But there are also signs of softening, as the US economy faces new challenges such as slower growth in some other countries, Powell continues....
You can watch the press conference live, here.You can watch the press conference live, here.
A nice summary:A nice summary:
A "somewhat" dovish rate hike by the @FederalReserve : The 25 bps increase in interest rates is accompanied byone less signaled hike for next year (from a total of 3 to 2),a 20 bps cut in the neutral rate estimate,lower GDP projectionBUT still a path that overshoots neutralA "somewhat" dovish rate hike by the @FederalReserve : The 25 bps increase in interest rates is accompanied byone less signaled hike for next year (from a total of 3 to 2),a 20 bps cut in the neutral rate estimate,lower GDP projectionBUT still a path that overshoots neutral
The S&P 500 index - a broader measure of US company values than the Dow - is now in the red, down 0.4% at 2,536 points.
That underlines that the Fed has disappointed Wall Street by not being more dovish.
You can read the Fed’s statement online, here. We’ll hear from Jerome Powell shortly....
Reaction to the US interest rate hike is pouring in.
Here’s Nancy Curtin, chief investment officer at Close Brothers Asset Management:
“Despite Trump’s misgivings the Fed was not going to be deterred from raising interest rates. In light of low unemployment and a robust economy, it was clear the central bank was led by the data in front of them.
The US economy has seen some momentum slow as the positive impact of fiscal policy wanes, which will affect future policy. The Fed will be wary that upwards pressure on prices is growing from a tight labour market, higher wages and Trump’s trade war. As we move into 2019, the Fed will take a flexible pragmatic approach, dependent on the economic data.”
Here’s Kully Samra, Vice President of Charles Schwab:
“It seems like the new year could equal new monetary policy for Mr Powell.....
We expect that the Fed will likely continue to raise short-term interest rates in 2019, but at a slower pace than in the past with one to two hikes, and may pause or end rate hikes by mid-2019, if the yield curve flattens and inflation remains tame. We also expect the dollar to stay firm until there is evidence that the Fed is done tightening and global growth picks up. Market volatility is a theme that is likely to persist in 2019. After a decade of unprecedented liquidity provision, liquidity is draining out of the system as the Fed and other central banks move toward tighter monetary policy.
Here’s more reaction:
In a nod to financial market volatility and concerns of slowing global economic growth, the Fed inserted a comment into their statement about monitoring ‘global economic and financial developments’ and assessing ‘their implications for economic growth
No Powell put on US equities as yet: @federalreserve raised rates to 2.25%-2.5% and still expects 'some gradual increases ' although median FOMC expectation now lower, with 2 rate rises in 2019 and one more in 2020, to 3.25%-3.5%.
Fed raises interest rates but lowers forecasts for GDP growth, inflation, median neutral rate, and expected hikes next year (two down from three). A dovish hike, but not dovish enough for markets?
The Federal Reserve has also added a line about monitoring “global economic and financial conditions” to its statement.
That suggests Fed governors are more worried about the state of the world economy, and the recent volatility in the markets.
Here's what changed in the new @federalreserve statement https://t.co/m4D0LXCDWV pic.twitter.com/7ZsEhK2mY7
The US stock market is falling sharply, losing almost all of its earlier gains.
The Dow, which was up almost 300 points, is now only 39 points higher.
That suggests investors had expected the Fed to be more dovish. Some in the market will be disappointed that policymakers still expect two rate hikes next year.
Dow sharply cuts gains after Fed hikes rates, cuts 2019 projection to 2 increases https://t.co/SPz0hnyZMd pic.twitter.com/7VlHk808fT
Nasdaq turns lower after sharply dropping on Fed decision https://t.co/SPz0hnyZMd pic.twitter.com/KsQiPTO3IR
The Fed is justifying its rate hike, by pointing out that the US economy looks robust.
It says:
Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate.
Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier in the year
Significantly, the Fed has also change the language in its statement.
It now only expects “some” further interest rate rises in future.
The Fed changed the statement to add in the word "some" to its key phrase "further gradual rate hikes" - adding in the word gives the Fed more room to maneuver lower.
The Fed has lowered its forecast for interest rate hikes in 2019.
Policymakers now only expect two rate rises next year, down from three previously.
Dot Plot (Dec. vs Sep.) {DOTS} pic.twitter.com/z7pUOp8KN2
NEWSFLASH: The US Federal Reserve has voted to raise interest rates, despite pressure from Donald Trump to leave them on hold today. The FOMC has decided to hike benchmark rates to 2.25%-2.5%, as most investors expected.
More to follow!
Brace for impact@federalreserve