by admin | May 25, 2021 | World
Washington : US Federal Reserve has raised the benchmark interest rates for the third time this year and maintained the forecast of three more rate hikes in 2018, as the economy and job market continued solid growth.
“In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to raise the target range for the federal funds rate to 1.25 to 1.5 per cent,” said the Fed in a statement on Wednesday after concluding two-day monetary policy meeting, Xinhua reported.
In December 2015, the central bank first raised the interest rates from nearly zero and hiked three more respectively in December 2016, March, and June this year. It also started to reduce its $4.5 trillion balance sheet from October this year.
The decision to raise interest rates is based on the assessment that the job market will remain strong growth. The central bank adjusted the statement language about the job market, painting a rosy outlook.
“This change highlights that the committee expects the labor market to remain strong, with sustained job creation, ample opportunities for workers and rising wages,” Fed Chair Janet Yellen said on Wednesday at her last press conference before her four-year term ends early next year.
According to the quarterly economic projections released the same day, Fed officials expected the unemployment rate will maintain at 4.1 per cent by the end of 2017, lower than September’s forecast of 4.3 per cent. It will further drop to 3.9 per cent in 2018.
She emphasized the risks of labor market overheating, saying that it would require the central bank to tighten monetary policy abruptly, jeopardizing economic expansion.
Fed officials also raised their forecast for economic outlook. According to their forecast, the US economy will grow 2.5 per cent both in 2017 and 2018, higher than their forecasts in September which projected a 2.4 per cent growth for 2017 and 2.1 per cent increase for 2018.
“Participants generally identified changes in tax policy as a factor supporting this modestly stronger outlook, although many noted that much uncertainty remains,” said Yellen.
During the conference, Yellen cautioned that the new forecasts shouldn’t be viewed as estimates of the impact of the tax policy and stressed the uncertainty about the impact.
Fed officials, including herself, widely believed that the tax policy would tend to provide only “modest” lift to GDP growth in the coming years, said Yellen.
On this expectation, Fed officials largely kept their forecasts for inflation outlook and the pace of future rate hikes unchanged.
They expected the inflation would grow 1.7 per cent in 2017 and further strengthen to 1.9 per cent in 2018, and still envisioned three more rate hikes in 2018, unchanged from their forecast in September.
The forecasts indicated that Fed officials saw no reason to accelerate the pace of future rate hikes, although the proposed tax cuts would modestly boost the growth.
Yellen recognized that the soft inflation was one of the risks the policymakers were facing. However, she said that Fed officials continued to believe that the factors which were holding down inflation this year were likely to prove transitory.
They continued to expect the inflation will go up to the central bank’s 2 per cent target in the medium term, said Yellen.
In view of the rather low inflation reading, Yellen stressed that it’s appropriate for the central bank to tighten monetary policy gradually.
At the press conference, Yellen noted that her nominated successor, Jerome Powell, has been part of the consensus shaping the Fed’s gradual rate hike strategy.
Powell, now a Fed governor, was nominated by President Donald Trump in November to replace Yellen when her terms ends in February, 2018.
Investors and market watchers widely expected that Powell will maintain the continuity of the monetary policy at the central bank.
—IANS
by admin | May 25, 2021 | World
Janet Yellen
Washington : The US Federal Reserve has left its benchmark interest rates unchanged amid speculation about President Donald Trump’s appointment of next Fed Chair.
The US labor market “has continued to strengthen” and economic activity “has been rising at a solid rate” despite hurricane-related disruptions, the Fed’s policy-making committee said in a statement released on Wednesday, after its two-day meeting, Xinhua news agency reported.
Citing past experiences, the central bank said the hurricanes, which hit the Gulf Coast in late August and September, are “unlikely to materially alter the course of the national economy over the medium term.”
The US economy grew at an annual rate of 3 per cent in the third quarter of the year, slightly lower than the 3.1 percent in the previous quarter, the Commerce Department reported last week.
In view of realized and expected labor market conditions and inflation, the central bank decided to maintain its target range for the federal funds rate at 1 to 1.25 per cent.
The Fed’s decision comes one day before Trump plans to announce his pick for the next leader of the central bank.
“I’ll be announcing tomorrow the new head of the Federal Reserve… I think you’ll be extremely impressed by this person,” Trump said on Wednesday at the Cabinet meeting.
Trump has recently finished interviews of five candidates for the next Fed Chair, including current Fed governor Jerome Powell, Stanford University economist John Taylor, former Fed governor Kevin Warsh, White House National Economic Council Director Gary Cohn and current Fed Chair Janet Yellen, whose term expires next February.
Multiple US media outlets reported Trump is most likely to nominate Powell, a Republican and former US Treasury official, for the post.
If Trump does nominate him, Powell is likely to continue Yellen’s gradual and cautious approach to tightening monetary policy.
“If Trump nominates Powell to replace Yellen it will imply continuity in the Federal Reserve’s interest rate and the balance sheet policy, at least for a time,” said Lewis Alexander, US chief economist at Nomura.
—IANS
by admin | May 25, 2021 | Banking, Economy, Markets, News
Mumbai : Mixed global cues, coupled with heavy selling pressure in banking, consumer durables and metal stocks, dragged the key Indian equity indices lower during the mid-afternoon trade session on Thursday.
According to market observers, investors remained cautious as the US Federal Reserve on Wednesday night signalled another rate-hike in December, while kept its interest rates steady for now. A rate-hike can potentially lead foreign portfolio investors (FPI) away from emerging markets such as India.
The US Fed also announced that it would start unwinding its $4.5 trillion balance sheet from October, a further step to end the loose monetary policy.
Around 1 p.m., the wider Nifty50 of the National Stock Exchange (NSE) traded lower by 43.70 points, or 0.43 per cent, at 10,097.45 points.
The 30-scrip Sensitive Index (Sensex) of the BSE, which opened at 32,406.42 points, traded at 32,287.35 points — down 113.16 points, or 0.35 per cent, from its previous close at 32,400.51 points.
The Sensex has so far touched a high of 32,462.61 points and a low of 32,164.42 during intra-day trade.
The BSE market breadth was bearish — 1,564 declines and 824 advances.
Dhruv Desai, Director and Chief Operating Officer of Tradebulls, said the benchmark indices extended losses as Asian markets were trading mixed after the US Fed signalled it expects another interest rate hike by year-end and disclosed timing for reducing its balance sheet.
“The Fed left rates unchanged for now, as was widely anticipated, but investors’ expectations changed for December after the US central bank signalled one more rate hike by year-end despite recent weak inflation readings,” Desai told IANS.
“Top gainers on the NSE were Dr. Reddy’s Lab, Lupin and Cipla, while on the losing side were Tata Motors (DVR), Hindalco and Coal India.”
On Wednesday, benchmark indices closed with fractional losses as heavy outflow of foreign funds and selling pressure kept investors’ sentiments subdued.
The Nifty50 of the National Stock Exchange (NSE) fell by 6.40 points or 0.06 per cent to close at 10,141.15 points, while the Sensex closed at 32,400.51 points — down 1.86 points, or 0.01 per cent.
—IANS
by admin | May 25, 2021 | Economy, Markets, News
Mumbai : Broadly negative global cues along with profit booking in metals, consumer durables and healthcare stocks and huge outflow of foreign funds led the key Indian equity indices to close on a flat-to-negative note on Tuesday.
According to market observers, investors were cautious ahead of the two-day US Federal Reserve meeting slated for later in the evening (India time).
The wider Nifty50 of the National Stock Exchange (NSE) touched a fresh high of 10,178.95 points during intra-day trade, but failed to sustain that level and closed at 10,147.55 points — marginally lower by 5.55 points or 0.05 per cent — from its previous session’s close.
The 30-scrip Sensitive Index (Sensex) of the BSE closed at 32,402.37 points — down 21.39 points, or 0.07 per cent, from its previous close, touching a high of 32,524.11 points and a low of 32,358.63 during intra-day trade.
The BSE market breadth was bearish with 1,309 declines and 1,297 advances.
In contrast, the broader market indices outperformed the Sensex, with the S&P BSE mid-cap index rising by 0.13 per cent and the small-cap index by 0.36 per cent.
“Markets ended marginally lower on Tuesday after a range bound session. Today’s losses came after the breakout seen yesterday indicating that the markets have taken a breather,” Deepak Jasani, Head – Retail Research, HDFC Securities, told IANS.
“Major Asian markets have ended on a mixed note. European indices like FTSE 100 and CAC 40 traded higher,” he added.
Vinod Nair, Head of Research, Geojit Financial Services, said: “Market traded on a flat note as investors are turning more cautious on account of Fed policy meeting. Also, the concern on valuation and lack of supportive cues to outpace the resistance influenced investors to book some profit.”
During the day, the Indian rupee weakened by 19-20 paise to 64.33 against the US dollar from its previous close at 64.13-14.
In terms of investments, provisional data with the exchanges showed that foreign institutional investors (FIIs) sold scrip worth Rs 1,719.62 crore while domestic institutional investors (DIIs) divested stocks worth Rs 77.68 crore.
According to Dhruv Desai, Director and Chief Operating Officer of Tradebulls, the Nifty hit a record high on Tuesday before erasing gains to trade slightly lower, dragged down by market heavyweights such as ITC.
“Broader sentiment was also cautious with investors awaiting the Federal Reserve’s policy statement this week for fresh hints on the possible pace and timing of further US monetary tightening,” Desai told IANS.
Sector-wise, the S&P BSE metals automobile index fell by 81.10 points, capital goods index by 71.14 points and consumer durables index by 58.81 points.
On the other hand, the S&P BSE oil and gas index surged by 175.67 points, automobile index by 151.97 points and banking index was up 36.94 points.
Major Sensex gainers on Tuesday were: Tata Motors, up 4.58 per cent at Rs 423.90; Tata Motors (DVR), up 3.22 per cent at Rs 240.65; Kotak Bank, up 1.63 per cent at Rs 1,035.50; Cipla, up 0.61 per cent at Rs 573.50; and ICICI Bank, up 0.60 per cent at Rs 294.35.
Major Sensex losers were: Coal India, down 2.49 per cent at Rs 258.20; HDFC, down 1.02 per cent at Rs 1,752.85; Larsen and Toubro, down 0.92 per cent at Rs 1,226.40; State Bank of India, down 0.87 per cent at Rs 267.80; and Sun Pharma, down 0.84 per cent at Rs 516.60.
—IANS