Апреля 24 2018

Jerome Powell moves to normalize USA monetary policy

Апреля 24 2018, 06:42 | Alonzo Simpson

Shares dollar slip as jitters mount on Fed trade and techMore

Shares dollar slip as jitters mount on Fed trade and techMore

"If interest rates are rising from a low level, there's more optimism about the economy, and that generally is a more positive thing", he said.

The US interest rate will be increased to a target range of 1.5% to 1.75% following the first meeting between Federal Reserve officials and their new chairman Jerome Powell. While this might seem daunting for the average consumer with debt or mortgages, the increase is actually a sign of continued health and strength in the economy. On the other hand, the unemployment rate projection was lowered.

If the Fed keeps raising its long-run target for its benchmark interest rate, it would nearly certainly mean the central bank plans to raise rates more aggressively.

But consider that approximately $62.50 a year has already been added as a result of the Fed's five rate hikes since late 2015, and interest payments may be up by $100 at the end of the year.

During the announcement, the Fed did not waver from the previously forecast three hikes for 2018, but did provide a steeper outline for hikes in 2019 and 2020, citing an improving economic outlook. Median fed funds rate is seen at 2.9 percent for 2019 and 3.4 percent in 2020, compared to 2.7 percent and 3.1 percent, respectively, projected in the December 2017 meeting.

First, and foremost, the Committee inserted into the statement the sentence, "The economic outlook has strengthened in recent months". Stocks recovered briefly and then slid into the close, a reflection of the market's confusion over Fed policy.

"I read this as the Fed is still having trouble rectifying moderate growth and subdued inflation", said economist Lindsey Piegza of Stifel.

U.S. President Donald Trump will announce tariffs on Chinese imports on Thursday, a White House official said, in a move aimed at curbing theft of U.S. technology and likely to trigger retaliation from Beijing and stoke fears of a global trade war. Wednesday's forecast put the Fed long-term rate - the point at which its policies are neither boosting the economy nor holding it back - at 2.9 percent.

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Federal Reserve Chairman Jerome Powell showed he will be guided by the USA economy's performance rather than the theories and models relied upon by his predecessors to set monetary policy for the past three decades.

Jitipol Puksamatanan, a strategist of Krungthai Bank, said that the baht's rise to 31.16 to the United States dollar, after the market opening, contrasted with its mark of 31.22 at the close of the previous day's trading.

The Federal Reserve is sticking to a cautious strategy on raising interest rates in 2018, but some officials left scattered hints they are more anxious about rising inflation than the central bank let on. There are also flash PMIs for Europe and the U.S.to savor as well.

There are also other changes in the Fed's statement.

In his news conference, Powell left the door open to more or fewer than three increases this year, depending on economic conditions.

Shares in USA social media giant Facebook fell 2.6 percent.

"With the unemployment rate now firmly below its long-run equilibrium, the implication is that the Federal Reserve (Fed) needs to normalise rates at a gradual and regular pace".

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