The Fed's plan to shrink its giant balance sheet fails to answer the market's most pressing question
28 June, 2017, 23:44
The Federal Reserve raised interest rates on Wednesday for the second time in three months, forecasting one more hike this year. Thursday's rate increase was approved 8-1.
In the wake of that recession, the Fed went on an enormous spending spree, buying bonds in order to keep interest rates down and encourage spending to kickstart the economy.
The gold price fell on Wednesday (June 14) following the US Federal Reserve's decision to raise interest rates for the second time this year.
In fact, the Fed has said in the past that if it reduces the balance sheet by $500 billion, it is the equivalent of two rate hikes, he pointed out.
The announcement that the Fed plans to begin paring its balance sheet later this year - "provided that the economy evolves broadly as anticipated" - involves its enormous portfolio of Treasury and mortgage bonds.
Yet the Fed's decision was over-shadowed by surprisingly weak US economic data released before the rate announcement.
"The committee now expects to begin implementing a balance sheet normalisation program this year, provided that the economy evolves broadly as anticipated".
"We have a very strong labor market, an unemployment rate that's declined to levels we have not seen since 2001". They are keeping the door open for an additional rate increase later in the year that would get the rates back on track.
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The Fed's preferred measure of underlying inflation has retreated to 1.5 percent, from 1.8 percent earlier this year, and has run below the central bank's 2 percent target for more than five years.
With GDP growth expected to remain above its long-term potential over the next few years, and the unemployment rate to remain below its long-run level, the Fed as a whole seems to be willing to look past what it sees as near-term economic noise.
"I really do think that she really kind of pushed some of those naysayers aside and, candidly, that third rate hike may just be justified", Gibson said in an interview with "Closing Bell".
The number of dissenting votes was taken as a sign by investors that the United Kingdom central bank is closer to ending the stimulus put in place after last year's Brexit referendum.
They forecast USA economic growth of 2.2 percent in 2017, an increase from the previous projection in March.
According to investing.com's fed rate monitor tool, almost 90% of traders expect the Fed to raise rates from 0.75-1% to 1-1.25%.
The Fed's meeting was the first since May's job report was released. Fed officials previously increased the rate in March to a range of 0.75 to 1 percent.
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