Thursday, 20 February, 2020

Fed minutes: Officials back reducing bond holdings this year

Fed minutes: Officials back reducing bond holdings this year Fed minutes: Officials back reducing bond holdings this year
Debra Rodriguez | 28 May, 2017, 01:49

The Fed voted unanimously at that meeting to hold the rate target steady at between 0.75% and 1%.

Before the release of the minutes, financial investors put the chances of a June rate increase at roughly 80 percent.

Most officials on the Federal Open Market Committee of rate setters still expect to raise interest rates "soon".

Two key messages were revealed in the Fed's meeting minutes last night, which might set a hawkish tone for central banks' monetary policy in the months to come.

Economists suggested that the Fed's decision on when to raise rates again will depend heavily on how the job market fares.

The Fed minutes also helped lift the Mexican peso to its strongest level since the election of U.S. President Donald Trump in November, up 0.9 percent to trade at 18.451 pesos per greenback.

VFW to place flags on veterans' graves at Royston cemetery
A free concert will follow at 5 p.m.at the John Lyman Center for the Performing Arts at Southern Connecticut State University. Service members will then assemble at the Legion Hall on Bradley Street in Fryeburg by 12:30 p.m. for a 1 p.m. parade start.

In the minutes, released Wednesday, official at the USA central bank said it would "soon be appropriate" to raise short-term interest rates again, the Wall Street Journal reported. Rupkey noted that the jobless rate is already below the 4.7 percent level that the Fed considers as signaling full employment. Officials agreed they should provide additional details of the plan "soon".

The Fed has more than $4 trillion in Treasury debt and mortgage-backed securities, largely accumulated as part of the effort to stimulate the economy in the wake of the 2007-2009 recession.

USA stocks were modestly higher late on Wednesday morning, aiming for a fifth straight day of gains, as investors awaited Federal Reserve minutes of its May meeting that could cement the chances of an interest rate hike next month.

"The May FOMC minutes confirm that most members view the reported slowdown in Q1 GDP growth... as likely to be "transitory" so they saw no need to shift their view that "gradual" rate hikes likely will continued", Ian Shepherdson of Pantheon Macroeconomics said in a research note.

Goldman said that "the risks to the timing of the balance sheet announcement are skewed toward the September meeting, in which case the third rate hike of the year would likely be deferred".

"There is less reason for the Fed to wait until late this year before starting the process", said Paul Ashworth, chief US economist for Capital Economics, in a note to clients. "The final values of the caps would then be maintained until the size of the balance sheet was normalized". They said it could possibly be done by halting reinvestments of ever-larger amounts of maturing securities, such as through bigger cuts to reinvestments every three months. After the Fed had cut its short-term rate to near zero in December 2008, it turned to three rounds of bond purchases to try to exert downward pressure on long-term rates.

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