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Tag: interest rates
Trump: Government Will Stay Shut Until Congress Funds His Wall

Trump: Government Will Stay Shut Until Congress Funds His Wall

In a brief Christmas Day session with reporters in the Oval Office, President Trump said the federal government will remain shut until Congress agrees to fund his proposed border wall.

“I can’t tell you when the government is going to reopen,” he said during a photo op of his holiday video calls with soldiers serving abroad. “I can tell you it’s not going to be open until we have a wall, a fence, whatever they’d like to call it. I’ll call it whatever they want. But it’s all the same thing. It’s a barrier from people pouring into our country.”

Asked whether he retains confidence in Federal Reserve chair Jerome Powell following December’s historic stock selloff and market decline, Trump said, “Well, we’ll see. They’re raising interest rates too fast, that’s my opinion. But I certainly have confidence. But I think it’ll straighten. They’re raising interest rates too fast because they think the economy is so good. But I think that they will get it pretty soon, I really do.”

Reporters also inquired whether he has confidence in Treasury Secretary Steve Mnuchin, who urged Trump to appoint Powell — and whose calls last Sunday to major bank executives, intended to reassure them, were blamed for the market plunge on Monday.

“Yes I do,” replied Trump. “Very talented guy, very smart person.”

He also insisted that federal employees furloughed without pay — many of them facing economic hardship — actually support his insistence that Congress appropriate $5 billion for the border wall. “Many of those workers have said to me, communicated — stay out until you get the funding for the wall,” Trump said. “These federal workers want the wall.”

But federal union leaders ridiculed that claim. “Federal employees should not have to pay the personal price for all of this dysfunction,” Tony Reardon, president of the National Treasury Employees Union, told the Washington Post. “This shutdown is a travesty. Congress and the White House have not done their fundamental jobs of keeping the government open.”

 

Cartoon: The Guide Dog

Cartoon: The Guide Dog

Yellen Says Fed Rate Hike Likely Appropriate In Coming Months

Yellen Says Fed Rate Hike Likely Appropriate In Coming Months

By Jonathan Spicer and Svea Herbst-Bayliss

CAMBRIDGE, Mass. (Reuters) – The Federal Reserve should raise interest rates “in the coming months” if the economy picks up as expected and jobs continue to be generated, U.S. central bank chief Janet Yellen said on Friday, bolstering the case for a rate increase in June or July.

“It’s appropriate … for the Fed to gradually and cautiously increase our overnight interest rate over time, and probably in the coming months such a move would be appropriate,” Yellen said during an appearance at Harvard University.

Her comments, while balanced, suggested the powerful Fed chair is on board with several of her colleagues who in recent weeks have said the central bank is preparing to follow up on an initial policy tightening in December.

Although Yellen expressed caution about too steep a rise in U.S. rates, she sounded more confident than she has in the past that the U.S. economy has rebounded from a weak winter and that inflation would edge higher toward the Fed’s 2 percent target.

“The economy is continuing to improve … growth looks to be picking up,” Yellen told a group of professors and alumni at the Ivy League college in Cambridge, Massachusetts. She expects the labor market to continue to improve despite much progress because “further gains are possible,” she said under an open-air tent on campus.

Prices for U.S. Treasuries fell after Yellen’s remarks, while stocks rose. The U.S. dollar <.DXY> was trading higher against a basket of currencies.

The probability of a rate hike at the Federal Open Market Committee’s June 14-15 meeting rose to 34 percent from 30 percent before Yellen’s remarks, according to CME Group, where the futures contracts are traded.

Bets on a rate increase at the July 26-27 policy meeting edged up to 60 percent, more than double the estimate from a month ago.

The Fed raised its key benchmark interest rate in December for the first time in nearly a decade, but has held off since then due to concerns earlier this year about a global economic slowdown and financial market volatility.

Those concerns have subsided somewhat in recent months.

In recent weeks, several Fed policymakers have reacted to stronger U.S. economic data including on housing and retail sales by putting a rate hike squarely on the table for either June or July. Earlier on Friday, the government revised higher its first-quarter GDP growth estimate to 0.8 percent, from 0.5 percent.

Yellen’s comment “reinforces the signals on early rate hikes communicated recently by her FOMC colleagues,” Mohamed El-Erian, chief economic adviser at Allianz, said via Twitter of the policy-making Federal Open Market Committee.

Weak oil prices and a strong dollar have been blamed for helping to keep U.S. inflation below the central bank’s target.

On Friday, Yellen said those factors “seem like they are roughly stabilizing at this point and my own expectation is that … inflation will move back up over the next couple of years to our 2 percent objective.”

Still, she cautioned against hiking rates too quickly given the Fed’s benchmark remains low at 0.25-0.5 percent currently. “It is important to be cautious … because if we were to trigger a downturn or to contribute to a downturn, we would have limited scope for responding,” Yellen said.

The economy has not seen “much improvement in wage growth which is suggestive of some slack in the labor market,” Yellen added just before receiving the Radcliffe Medal from Harvard’s Radcliffe Institute for Advanced Study.

Yellen was introduced by former Fed Chair Ben Bernanke, to whom she said Americans owe “an enormous debt of gratitude” for guiding the economy through the 2007-2009 financial crisis.

Now in her third year as Fed chair, Yellen was speaking just hours before the Memorial Day long weekend, and joked that her comments would be brief so as not to delay Wall Street money managers hanging on her words.

She has a second public appearance scheduled for June 6 in Philadelphia, just a week before the next policy decision.

 

(Additional reporting by Howard Schneider in Washington; Editing by Paul Simao and Chizu Nomiyama)

 

Fed Raises Interest Rates, Citing Ongoing U.S. Recovery

Fed Raises Interest Rates, Citing Ongoing U.S. Recovery

By Howard Schneider and Jason Lange

WASHINGTON (Reuters) — The Federal Reserve hiked interest rates for the first time in nearly a decade on Wednesday, signaling faith that the U.S. economy had largely overcome the wounds of the 2007-2009 financial crisis.

The U.S. central bank’s policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25 percent and 0.50 percent, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.

“With the economy performing well and expected to continue to do so, the committee judges that a modest increase in the federal funds rate is appropriate,” Fed Chair Janet Yellen said in a press conference after the rate decision was announced. “The economic recovery has clearly come a long way.”

The Fed’s policy statement noted the “considerable improvement” in the U.S. labor market, where the unemployment rate has fallen to 5 percent, and said policymakers are “reasonably confident” inflation will rise over the medium term to the Fed’s 2 percent objective.

The central bank made clear the rate hike was a tentative beginning to a “gradual” tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.

“The process is likely to proceed gradually,” Yellen said, a hint that further hikes will be slow in coming.

She added that policymakers were hoping for a slow rise in rates but one that will keep the Fed ahead of the curve as the economic recovery continues. “To keep the economy moving along the growth path it is on … we would like to avoid a situation where we have left so much (monetary) accommodation in place for so long we have to tighten abruptly.”

New economic projections from Fed policymakers were largely unchanged from September, with unemployment anticipated to fall to 4.7 percent next year and economic growth hitting 2.4 percent.

The Fed statement and its promise of a gradual path represented a compromise between policymakers who have been ready to raise rates for months and those who feel the economy is still at risk from weak inflation and slow global growth.

“The Fed is going out of its way to assure markets that, by embarking on a ‘gradual’ path, this will not be your traditional interest rate cycle,” said Mohamed El-Erian, chief economic advisor at Allianz.

Fed officials said they were confident the situation was ripe for them to make a historic turn in policy without much disruption to financial markets, which had expected the hike this week.

U.S. stocks rallied on the news, in part because the Fed made clear it would proceed slowly with further tightening. Yields on U.S. Treasuries rose, while the dollar was largely unchanged against a basket of currencies. Oil prices fell sharply before paring losses.

POLICY STILL ACCOMMODATIVE

Yellen on Wednesday said the Fed had no desire to curb consumers from spending or businesses from investing. She emphasized that interest rates remained low even after the rate hike, near levels economists regard as appropriate for a recession.

“Policy remains accommodative,” Yellen said. “The U.S. economy has shown considerable strength. Domestic spending has continued to hold up.”

Fed policymakers’ median projected target interest rate for 2016 remained 1.375 percent, implying four quarter-point hikes next year. Based on short-term interest rate futures markets, traders expect the next rate hike in April.

A Dec. 9 Reuters poll showed economists forecasting the federal funds rate to be 1.0 percent to 1.25 percent by the end of 2016 and 2.25 percent by the end of 2017.

The rate hike sets off an immediate test of new financial tools designed by the New York Fed for just this occasion, as well as a likely reshuffling of global capital as the reality of rising U.S. rates sets in.

To edge the target rate from its current near-zero level to between 0.25 percent and 0.50 percent, the Fed said it would set the interest it pays banks on excess reserves at 0.50 percent, and would offer up to $2 trillion in reverse repurchase agreements, an aggressive figure that shows its resolve to pull rates higher.

The impact on business and household borrowing costs is unclear. One of the issues policymakers will watch closely in coming days is how long-term mortgage rates, consumer loans and other forms of credit react to the rate hike.

(Additional reporting by Lindsay Dunsmuir and David Chance in Washington, Ann Saphir in San Francisco and Jonathan Spicer and David Gaffen in New York; Editing by Paul Simao)

Photo: U.S. Federal Reserve Chairman Janet Yellen answers a reporter’s question during a news conference in Washington December 16, 2015. REUTERS/Jonathan Ernst