Federal Reserve announces start to modestly reducing bond holdings


Fed Chair Janet Yellen said in a press conference after the meeting that a fall in inflation this year remained a mystery and said the USA central bank was ready to change the rate outlook if needed.

At a news conference Wednesday, Yellen said the Fed still believes that persistently low inflation is temporary. But its stimulus efforts that have kept rates near historic lows since 2008 have failed to boost inflation. In a press conference, Fed chair Janet Yellen described it as something of a "mystery".

In its policy statement, the bank took note of Harvey, Irma and hurricane Maria, which it said had devastated many communities.

Yet Yellen and her predecessor, Ben Bernanke, have largely brushed off those concerns with a gradual and sometimes halting march to a more normal policy stance. It has also trimmed its inflation forecast.

Yellen will also assess the health of the economy, a key indicator that could predict whether the Fed will stay on track with future policy projections. The Fed's preferred price gauge rose 1.4% in July from a year earlier. That would mean inflation would fall short of the Fed's 2 percent target for the sixth straight year.

But the central bank has been going backward in trying to meet its other mandate of stabilizing prices at an annual inflation rate of 2 percent over time. They said they expect three more rate changes next year, two in 2019 and one in 2020. It has raised them four times since the end of 2016. But given that the chances of a December move are still 47%, the greenback will likely need a more hawkish assessment for the path of rates, i.e.an expectation of more rate hikes in 2018. They now expect there will likely be two hikes, down from three.

The balance sheet primarily consists of government and mortgage-backed bonds. This marks the last leg of unwinding of QE programme which had quadrupled the balance sheet to Dollars 4.5 trillion.

Fed officials made a decision to keep their short-term benchmark rate between 1 percent and 1.25 percent.

Japan Open: PV Sindhu and Saina Nehwal advance to Round 2
In the second, she simply faded away as Okuhara raised her level and ran away to a 21-18, 21-8 win in front of her home crowd. This was the ninth career meeting between the two and Nozomi now has a 5-4 advantage with this win.

The Federal Reserve finally announced yesterday that it will begin tapering its massive balance sheet from October at a snail's speed.

USA share prices recovered quickly from initial losses following the Fed's announcement, with the S&P 500 .SPX ending slightly higher, adding to a string of closing records.

The Fed had reduced its benchmark interest rate to near zero, Blinder says. Also, the Fed started buying massive amounts of US government bonds to help reduce long-term interest rates and support growth.

Markets anticipated the balance sheet unwinding and have been quiet so far on Wednesday.

Both the Dow and S&P 500 fell following the Fed statement but reversed those losses to end the session slightly higher and add to a string of closing records. The consumer staples index.SPLRCS was the biggest decliner, down 0.97 percent drop.

The bar has been set very high for US Dollar in response to the Federal Reserve meeting on Wednesday which forms the key event for the USD this week.

Under the plan the Fed announced in June, it will start to allow a slight $10 billion in holdings to roll off the balance sheet each month _ $6 billion in Treasurys and $4 billion in mortgage bonds. The program pushed the Fed's balance sheet from just under $1 trillion to $4.5 trillion in bonds and other securities.