FOMC FAQ: Is A Rate Hike Imminent?

Jun 15, 2017, 01:52

Yellen's colleagues are predicting that the unemployment rate will dip to 4.2% by 2019 while the annual inflation rate speeds up to 2%. Private economists had expected the move given the labor market's recent performance.

That's the highest level since 2008, when policymakers cut rates to encourage borrowing and spending after the financial crisis. The move follows a record run of jobs growth in the U.S. that has driven the unemployment rate down to its lowest level in 16 years.

The recent economic developments prompted FOMC members to drop their median projection for inflation to 1.6 percent in 2017, from 1.9 percent forecast in March. Traders now see June next year as the earliest meeting at which the USA central bank will next lift its target for overnight borrowing costs, based on fed funds futures traded at CME Group as analyzed by Reuters.

An increase was widely expected, with markets pricing in a near-100 per cent chance of a hike in the hours running up the decision.

More news: Trump Expected To Restrict Trade, Travel With Cuba

Officials also released their updated projections for the economy and the path of interest rates.

The most popular estimate of the so-called neutral rate, which neither spurs nor brakes the economy, is produced by the Federal Reserve Bank of San Francisco, based on work by Thomas Laubach - a key official at the Fed's Board of Governors in Washington - and San Francisco Fed President John Williams.

The FOMC is of the opinion that waiting too long to scale back accommodations could potentially cause a rapid increase in rates, which could disrupt the market and send the economy into another recession. Neel Kashkari, chair of the Federal Reserve Bank of Minneapolis, wanted to maintain the existing target range for the federal funds rate.

Before the release of Wednesday's statement, traders in future markets placed only a 37% probability of one more rate increase this year, according to CME Group, and an 18% probability of a second quarter-point increase by mid-2018.

More news: Topeka weather for Thursday, June 8, 2017: Sunny with highs in 80s

But the Fed's forecasts are only predictions and are frequently revised as its assessments evolve. Inflation was expected to be at 1.7 per cent by the end of this year, down from the 1.9 per cent previously forecast. In fact, 30-year mortgage rates have declined this year even after the Fed hiked rates in December and March.

Yellen indicated the Fed still remained confident inflation would rise to its target over the medium term, bolstered by what she described as a robust labour market that is continuing to strengthen.

USA stocks fell in volatile trading while the dollar pared losses on Wednesday after the Federal Reserve delivered a widely expected interest rate hike and announced it would begin cutting its huge holdings of bonds this year.

U.S. Treasurys spiked Wednesday, with the benchmark 10-year yield sliding to 2.117 percent; it traded near 2.2 percent earlier in the session. One report suggests that losing the market could cost the country 83,000 jobs, mostly in London, one of the world's top finance hubs.

More news: Apple Embraces VR at WWDC 17

YOU MIGHT ALSO LIKE
  • Irving saves his best for when Cavs face Finals elimination

    Irving saves his best for when Cavs face Finals elimination

    And the more you give me a little bit of an opportunity, the more you give me a little bit more of a leash, I can contribute. Golden State is taking its second shot at clinching the National Basketball Association championship Monday night.

    Uber's board votes unanimously to adopt all recommendations of Holder report

    The board reportedly considered this option during their meeting on Sunday , alongside the recommendations in Holder's report. A source raised the prospect that Kalanick could take time off while sweeping changes to management practices were made.
    Bill Cosby 'drugged friend then sexually assaulted her'

    Bill Cosby 'drugged friend then sexually assaulted her'

    Cosby, is now 79 and claims he is blind . "No, he was sorry for what he did", Gianna Constand shot back. She initially said she went to Cosby's house and was assaulted after a dinner out with other people.
  • E3 2017: Trailer and Details for The Crew 2 Revealed

    E3 2017: Trailer and Details for The Crew 2 Revealed

    Players who already played The Crew will be eligible for the Crew Rewards Program , offering up to 18 vehicles in The Crew 2 . The first 3 awards are available right now: it's the FORD MUSTANG GT 2015, the DUCATI DIAVEL and the MASERATI GRAND TURISMO.
    'A Good Thing': WH, GOPers Defend Kushner On Russia Backchannel Reports

    'A Good Thing': WH, GOPers Defend Kushner On Russia Backchannel Reports

    Kushner in March said he was ready to testify about his Russian Federation meetings to the Senate Intelligence Committee. In addition to that, and perhaps more importantly, he is a very good person".
    Third London Bridge attacker named

    Third London Bridge attacker named

    A number of barriers on various bridges have been installed by London officials since the attack to protect pedestrians. Michael Mimbo, 25, said the suspected attacker was nicknamed "Abz" at the local gym where he worked out regularly.
  • Watch ICC Champions Trophy 2017 live on TV, online

    Williamson and Taylor shared a 95-run partnership for the third wicket and were on the brink of taking control of the game. They could not play the full 50 overs as they were all out in 49.3 overs but by then, they have already scored 310 runs.
    Sushma Swaraj rubbishes money making allegations made by Trump

    Sushma Swaraj rubbishes money making allegations made by Trump

    The dates for the visit are being worked out, sources said. "But at the same time terror and talks can not go together". She said that India will not be impacted by some Gulf countries cutting off diplomatic ties with Qatar.
    Dodgers ace Clayton Kershaw gets 2000th career strikeout

    Dodgers ace Clayton Kershaw gets 2000th career strikeout

    With four strikeouts on Friday night, Kenley Jansen has now struck out 37 batters and walked none over his entire 2017 season. Garza, on the other hand, has given up 10 runs in his last two starts covering 11 innings of work.
  • Rumor Central: Markelle Fultz hires agent ahead of Lakers workout

    Rumor Central: Markelle Fultz hires agent ahead of Lakers workout

    As time goes on, Jackson seems like the more natural pick at two, while Ball would make more sense for the Sixers at No. 3. The Kings can play the patient game and wait to see if Fox will fall to them at No. 5.
    Trump Hotels unveils lower-budget American Idea chain

    Trump Hotels unveils lower-budget American Idea chain

    The Trump name will not be displayed anywhere in the hotels, the Times noted. "And we just saw there, there was a void missing. The company also says the first of dozens of hotels in another new Trump chain called Scion is under construction in MS , too.
    Former and current teammates congratulate Edinson Volquez on no-hitter

    Former and current teammates congratulate Edinson Volquez on no-hitter

    His 384-foot drive was his third homer of the season - all three have been hit at Petco Park - and third grand slam of his career. Brett Gardner his 999th and 1,000th hits for the Yankees, who reopened a three-game lead in the AL East.
popular