Fed to cut bond holdings

A trader works on the floor of the NYSE in New York

There could well be a real-world impact of all this, not just in terms of how markets respond, because other assets bought by the Fed under QE include mortgage-backed securities - which, as anyone familiar with the history of the financial crisis will remember, is a bond backed by mortgages on people's homes or on commercial property.

September's meeting is key because the Federal Reserve is expected to announce plans to unwind its massive $4 trillion balance sheet - a formal process for tightening monetary policy. In fact, it appears that markets are already betting on the Fed to not follow through on its projected December rate hike.

The Fed's policymaking committee approved its action on a 9-0 vote after ending its latest meeting.

Speaking about the unanimous decision, which was made in line with wider market expectations, Nancy Curtin, chief investment officer at Close Brothers Asset Management, said such caution from the U.S. central banks was understandable given the changing composition of its current leadership, a tightening labour market and weak wage growth.

"A lot of people were thinking (the Fed) would pass in December", Silvia said. At this rate, the Fed's balance sheet would still be above $3 trillion by late 2019.

Yellen says that inflation has been below target since 2013 for a variety of factors.

The Fed views a modest level of inflation as helping to propel consumer spending and business investment.

"Hurricanes Harvey, Irma, and Maria have devastated many communities, inflicting severe hardship". In October, it will start cutting $10bn per month from the amount of maturing securities it reinvests, rising to a maximum of $50bn per month until its balance sheet is reduced by more than $1trn. That figure would inch up by $10 billion each quarter until it reaches $50 billion in monthly reductions in October 2018.


Months of telegraphing by the central bank allowed for the muted market response seen on Wednesday.

Policymakers have signalled their plans for the Fed balance sheet for months in an effort to avoid rattling markets.

The question of when and how the Fed will manipulate its main policy lever - its target for short-term rates - in coming months is less clear. That's the point at which its benchmark rate is neither stimulating economic growth nor restraining it. The 10-year U.S. Treasuries yield US10YT=RR rose to 2.278 percent, briefly hitting a six-week high of 2.289 percent.

Interest rates have stayed low despite a shallow unemployment rate of 4.4 percent in August and inflation down to 1.4 percent. The Fed, though, has yet to achieve its other objective of stabilizing prices at a 2 percent annual rate.

"There is a bit of a disconnect between the market and the Fed", he said.

The committee notes that inflation rates will continue to be monitored closely, but they will not be increasing interest rates as of this time. Gary Cohn, White House National Economic Council director, was rumored to be Trump's top choice to lead the Fed, but fell out of the president's favor after criticizing his defense of white nationalist marchers in Charlottesville, Va. She reiterated Wednesday that she intends to serve out her current term, but said, "I'm really not going to comment on my intentions beyond that".

Besides Yellen, the resignation of Vice Chair Stanley Fischer later this month, could leave the Fed with four empty seats, at least until Trump nominee Randall Quarles is confirmed. "It will be up to future policy makers to decide in the event of a severe downturn whether they think it's appropriate to again resort to adding assets to a balance sheet", she said.

Related:

  • This Walmart Heiress Is Now the World's Richest Woman

    This Walmart Heiress Is Now the World's Richest Woman

    In 2015, 8 people were found guilty in taking advantage of the billionaire's mental state. Today, the richest woman in the world, Liliane Bettencourt, passed away at the age of 94.
    Taylor Swift's 'Look' becomes 'Too Sexy' in Right Said Fred mash-up

    Taylor Swift's 'Look' becomes 'Too Sexy' in Right Said Fred mash-up

    Don't you? Not only are her cats adorable but they are starting to go viral due to the costumes and creativity behind them. Since it released on YouTube, Taylor Swift's " Look What You Made Me Do " has earned over 416 million views and counting.
    Student Shot In High School Cafeteria; Teacher Subdues Suspect

    Student Shot In High School Cafeteria; Teacher Subdues Suspect

    Officials at a central IL high school say police have someone in custody after one person was wounded during a shooting. We are working to get more information on this developing story and will update it as soon as details are available.
  • USA  flies bombers over Korean peninsula for drill

    USA flies bombers over Korean peninsula for drill

    On Monday, the official China Daily said sanctions should be given time to bite but that the door must be left open to talks. It also has threatened to launch missiles close to the coast of Guam, a USA island territory in the Pacific.
    Pakistan PM Shahid Khaqan Abbasi sees zero role for India in Afghanistan

    Pakistan PM Shahid Khaqan Abbasi sees zero role for India in Afghanistan

    The Pakistan PM dismissed the question of links between the Haqqani network and Pakistan's intelligence agency, the ISI. Time has proven that it's a process that is very secure.
    Mattis Leaves the Door Open to Military Options in North Korea

    Mattis Leaves the Door Open to Military Options in North Korea

    Meanwhile the United States and Chinese leaders have committed to "maximising pressure on North Korea", the White House has said. Several Pentagon officials say Mattis was not signaling that tactical nuclear weapons are likely to be placed in South Korea.
  • Manafort Offered 'Private' Campaign Briefings to Close Putin Ally

    Manafort Offered 'Private' Campaign Briefings to Close Putin Ally

    Russian Federation has denied it interfered in the US election, and Trump has said there was no collusion with his campaign. Numerous emails do concern money that Mr Manafort believed he was owed by Eastern European clients, according to the Post .
    Dozens of states sign nuke weapons ban treaty at UN

    Dozens of states sign nuke weapons ban treaty at UN

    General Assembly: "It will be a great pity if this agreement were to be destroyed by rogue newcomers to the world of politics". Costa Rican President Luis Guillermo Solis said supporters of the treaty regretted the nuclear-armed nations' position.
    USA  to Continue Pursuing Diplomatic Path With North Korea - UN Ambassador Haley

    USA to Continue Pursuing Diplomatic Path With North Korea - UN Ambassador Haley

    The administration must decide in mid-October whether it will certify that Iran is still in compliance with the agreement. He also decried the "disastrous rule" of Venezuela's Nicolas Maduro and urged the U.N.to step in.
  • Bose Unveils Headphones Optimized for Google's Assistant

    Bose Unveils Headphones Optimized for Google's Assistant

    With the help of Google Assistant , Alexa, Cortana, or Siri, you can easily access information in a more natural way. Bose innovations have spanned decades and industries, creating and transforming categories in audio and beyond.
    SEC says it was hacked; data might have been used in trading

    SEC says it was hacked; data might have been used in trading

    But the 2016 breach was the result of a deliberate attack aimed at accessing the EDGAR filing system. The US Securities and Exchange Commission was subject to hacking previous year , it has disclosed.
    SK hynix keeps mum on Toshiba deal

    SK hynix keeps mum on Toshiba deal

    Western Digital also reiterated that it expected to win its arbitration against Toshiba at the International Chamber of Commerce. The iPhone X maker, however, extended its support to Bain consortium to buy the Toshiba memory chip unit worth $22 billion.

Comments

Latest news

Donald Trump persuades China to cut North Korea financial transactions
Earlier, North Korea's foreign minister described Trump's threat to destroy his country as " the sound of a dog barking ". He mocked Kim as a " Rocket Man " on a "suicide mission", and sketched out potentially cataclysmic consequences.

Kylie Jenner Pregnant With Travis Scott's Baby?
The site also points to several photos Kylie posted on SnapChat that show her in uncharacteristically loose-fitting tee shirts. The 20-year-old Life of Kylie star is pregnant and already sharing the news with her friends, TMZ reported .

Pennsylvania Credit Rating Takes Hit After Budget Standoff
The House GOP said the focus needs to be on tackling entitlement programs and corrections costs. Wolf has said he expects there will be a compromise before the end of the month .

Former Candidate Endorses Fellow Outsider In Alabama GOP Runoff
Along with the Huntsville rally where Brooks appeared, Moore made stops at a GOP club meeting and churches in north Alabama. Public Advocate's first video for Roy Moore had received over 35,000 views (also 99 per cent Alabamians).

'America's Got Talent' finalists compete in season 12 finals
America's Got Talent expressed their support and condolences over social media. "That's why I'm fighting to the end, just like he did".

Stocks Hit Record Intraday Highs as Financials Gain Before US Fed Meeting
Roughly 6.7 billion shares changed hands on US exchanges compared with the 6 billion average for the last 20 sessions. That compares with the 5.9 billion daily average for the past 20 trading days, according to Thomson Reuters data.

Not Dead Yet: Touch ID May Return in Next iPhone
Instead of adding more and new features to their phone, they are actually removing the existing ones. One can only imagine what Apple will release next time and the cost to purchase it.

Explaining the Graham-Cassidy Repeal Bill
That's nearly certainly not true, given the Medicaid expansion rollback that would take place under the bill. Kimmel acknowledged that some viewers might object to the overtly political message of his monologue.

Apple Watch Series 3 is having connectivity issues
Apple confirmed that its new Series 3 Apple Watch can encounter problems connecting to a cellular network. In fact, AT&T, T-Mobile, and Verizon offer service packages dedicated to Apple Watch Series 3.

Kenya's presidential re-run may be postponed
Armed police patrolled the entrance to the court and trucks filled with security forces were parked outside the building. The constitution dictates the poll take place within 60 days of the Supreme Court's ruling, which is October 31.

West Ham vs Tottenham: Slaven Bilic facing selection headache for London derby
Huddersfield Town travel to London on Monday to take on a West Ham United side languishing at the foot of the Premier League table.

Syrian troops battling ISIS advance toward US-backed force
The Russian foreign ministry said units of the Syrian army had already crossed. The Islamic State militia took control of Deir al-Zour in 2014.

Maugerville power company helps restore service in Irma-hit Florida
An electrical worker repairs stop lights the morning after Hurricane Irma swept through Naples, Fla., on September 11, 2017. Most of the remaining outages were in Florida Power & Light's service area in the southern parts of the state.

Alec Baldwin just majorly dissed President Trump
Alec has had three kids with his wife in the last three years but in 2017 thus far, the pair hasn't conceived for the fourth time. Producer Lorne Michaels nailed the short speech requirement, accepting a statue for Best Comedy Series for Saturday Night Live .

Reliance Jio prevails over Airtel, Idea as Trai cuts IUC
Effective October 1st, TRAI has reduced IUC charges to 6 paise/minute from the existing 14 paise/minute. The reduction in interconnect usage charge will benefit Jio, for which the charge was a huge liability.

Other news