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Money U.S. Fed lifts rates amid stronger inflation, drops crisis-era guidance

21:36  13 june  2018
21:36  13 june  2018 Source:   reuters.com

Tariffs, mortgage rules key to Bank of Canada rate decision: Poloz

  Tariffs, mortgage rules key to Bank of Canada rate decision: Poloz The effects of U.S. steel and aluminum tariffs and tighter mortgage rules will "figure prominently" in the Bank of Canada's July decision on interest rates, Governor Stephen Poloz said on Wednesday. In a speech promising increased transparency from the central bank in an age of economic uncertainty, Poloz said there was "a litany of things we simply do not know" these days, which is why the bank is "particularly data-dependent" right now.With the next rate decision set for July 11, Poloz said the bank was working to incorporate in its projections the effects of U.S.

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 percent to 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy “for some time” and signaled it would tolerate inflation above its 2 percent target at least through 2020.

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of between 1.75 percent and 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy “for some time” and signaled it would tolerate above-target inflation at least through 2020.

The Federal Reserve raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the U.S. central bank's shift from policies used to battle the 2007-2009 financial crisis and recession.

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of between 1.75 percent and 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy "for some time" and signaled it would tolerate above-target inflation at least through 2020.

The Fed has raised rates seven times since late 2015 on the back of the economy's continuing expansion and solid job growth, rendering the language of its previous policy statements outdated.

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The Federal Reserve raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the U . S . central bank's shift from policies used to battle the 2007-2009 financial crisis and recession. http:// feeds .reuters.com/~r/reuters/t Thanks for Watching.

The beginner' s guide to FX trading. In raising its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 percent to 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy “for some time” and signaled it would tolerate inflation above its 2

Inflation is also snapping into line, with fresh projections from policymakers on Wednesday indicating it would run above the central bank's 2 percent target, hitting 2.1 percent this year and remaining there through 2020.

Policymakers projected a slightly faster pace of rate increases in the coming months, with two additional hikes expected by the end of this year, compared to one previously.

They see another three rate increases next year, a pace unchanged from their previous forecast.

"The labor market has continued to strengthen ... economic activity has been rising at a solid rate," the central bank's rate-setting Federal Open Market Committee said in its unanimous statement after the end of a two-day meeting.

"Household spending has picked up while business fixed investment has continued to grow strongly," the Fed said.

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  Inflation rate holds steady at 2.2% in May despite soaring gasoline prices The cost of living increased at a 2.2 per cent annual pace last month, matching the increase seen a month earlier, but well short of what economists had been expecting.Statistics Canada reported Friday that all eight components it tracks to come up with the consumer price index were higher during the month, but more than half of them grew by a slower rate than they did in April.

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 percent to 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy “for some time” and signaled it would tolerate inflation above its 2 percent target at least through 2020.

The Fed said its policy of further gradual rate increases will be “consistent with sustained expansion of economic activity, strong labour market conditions, and inflation near the Committee’s symmetric 2 per cent objective.” Related. Shares in U . S . homebuilders fall amid mounting Fed rate -hike speculation.

U.S. Treasury yields rose after the release of the statement while U.S. stocks were trading marginally lower. The dollar pared losses against a basket of currencies.

Fed Chairman Jerome Powell is scheduled to hold a press conference at 2:30 p.m. EDT (1830 GMT).

"The Fed's path of gradual rate hikes and slow (balance) sheet reduction seems well established at this point. The trajectory of U.S. inflation or the broader U.S. economy would likely need to change materially for the FOMC to deviate from that path," said Aaron Anderson, senior vice president of research at Fisher Investments.

The Fed's short-term policy rate, a benchmark for a host of other borrowing costs, is now roughly equal to the rate of inflation, a breakthrough of sorts in the central bank's battle in recent years to return monetary policy to a normal footing.

Though rates are now roughly positive on an inflation-adjusted basis, the Fed still described its monetary policy as "accommodative," with gradual rate increases likely warranted as a sturdy economy enters a 10th straight year of growth.

Canadian Rates Will Rise But Poloz Keeps Market Guessing on When

  Canadian Rates Will Rise But Poloz Keeps Market Guessing on When Bank of Canada Governor Stephen Poloz gave little indication whether interest rates are heading higher in a speech that focused on how the central bank needs to avoid over-communicating policy intentions in a world of uncertainty.Poloz, speaking to reporters following a speech in Victoria, said the economic “big picture” supports a withdrawal of stimulus given interest rates remain at historically low levels. The central bank also isn’t likely to be derailed by “single-data points,” referring to a string of disappointing economic numbers in recent weeks, or heightened trade uncertainty whose actual impact remains unknown.

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 percent to 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy "for some time" and signaled it would tolerate inflation above its 2 percent target at least through 2020.

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of 1.75 percent to 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy "for some time" and signaled it would tolerate inflation above its 2 percent target at least through 2020.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run.

FED CONFIDENCE

The Fed now sees gross domestic product growing 2.8 percent this year, slightly higher than previously forecast, and dipping to 2.4 percent next year, unchanged from policymakers' March projections. The unemployment rate is seen falling to 3.6 percent in 2018, compared to the 3.8 percent forecast in March.

The rate increase was in line with investors' expectations and showed policymakers' confidence in the economy's growth prospects, continued low unemployment and steady inflation. Investors had given just over a 91 percent chance of a rate rise on Wednesday, according to an analysis by CME Group.

The Fed said its policy of further gradual rate increases will be "consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective."

In a technical move, the central bank also decided to set the interest rate it pays banks on excess reserves - its chief tool for moderating short-term interest rates - at just below the upper level of its target range. The step was needed, the Fed said, to be sure rates stay within the intended boundaries.

The policy statement bypassed discussion about the tensions over the Trump administration's trade policies, including a decision two weeks ago to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico.

Individual Fed policymakers have expressed concerns about the economic risks of a broad tit-for-tat tariff retaliation, but have said they would not change their policies or forecasts until those risks are realized.

(Reporting by Howard Schneider Editing by Paul Simao)

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