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Treasuries Move To The Downside Following Fed Announcement

22 Septembre 2017

Yellen said in June that the plan would lead to "a gradual and largely predictable decline" in the assets.

The clock is ticking on Trump to pick a Fed chair and provide a continuity in leadership.

Persistent low inflation is a bit of a "mystery", Yellen told a press conference in response to a question from my colleague Chris Condon.

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

The Fed statement also sent the dollar higher against other currencies. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. The euro dropped to $1.1879 from above $1.20 just before the Fed's policy announcement. If they do, "it would require an adjustment of monetary policy", Yellen said. This is because of hurricane damage and of course the possible headwinds to the U.S. economy as a result. American Airlines Group rose 87 cents, or 2 percent, to $45.25.

The Russell 2000 is up 13.71 points, or 1 percent.

One short-term effect of the hurricanes will be higher gasoline prices, which "will likely boost inflation temporarily", the Fed said. Over 2017, Fed policymakers have been dealing with unexpected weakness in inflation despite a very low jobless rate.

The Fed projects a 2.4% growth in the economy this year, which is a marked improvement over last year, and they expect unemployment to continue dropping down to 4.1% next year.

With the interest rising on variable rate loans, consumers who have large amounts of debt will see their borrowing costs rise. That to me seems to be at least the early story here, which suggests a lot of people maybe weren't anticipating the Fed would stick with the third rate hike expectation this year. Four say steady and one says that two hikes this year are appropriate.

Bloomberg's dollar index rose after the central bank set an October start for shrinking its balance sheet and maintained a forecast for another rate increase this year.

Oil prices flirted with multi-month highs, despite a rise in USA crude inventories, after the Iraqi oil minister said OPEC and its partners were considering extending or deepening output cuts, ahead of the planned meeting between OPEC and non-OPEC nations on Friday.

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

Tata Steel advanced 1.7 percent after the miner entered into a joint venture with Germany's Thyssenkrupp to merge their European steel businesses.

Bond prices rose. The yield on the 10-year Treasury note fell to 2.24 percent.

"Hurricanes Harvey, Irma and Maria have devastated many communities, inflicting severe hardship", said the Fed in its post-meeting statement.

As a result, the central bank's balance sheet will shrink over time, drying up a source of liquidity and acting as a small interest rate increase.

During the financial crisis in 2007, the Federal Reserve went on a shopping spree with Treasury bonds and mortgage securities. The Fed on Wednesday left its benchmark interest rate unchanged, in a range of 1%-1.25%. The caution in raising rates comes as inflation has consistently stayed below the Fed target of 2 percent.

Treasuries Move To The Downside Following Fed Announcement