Senior Fed official backs July interest rate hike

WASHINGTON -- A senior US Federal Reserve official said Thursday he supported another interest rate hike later this month, and backed a second hike before the end of the year to keep tackling inflation.

After 10 consecutive increases, the Fed in June chose not to hike its benchmark lending rate, saying policymakers would use the time to assess the impact of raised rates on the US economy.

According to meeting notes released later, most members of the Fed's rate-setting Federal Open Market Committee (FOMC) indicated they expect two additional hikes will be needed this year to help keep inflation on a downward trajectory.

On Thursday evening, Fed governor and FOMC member Christopher Waller indicated he was one of them.

"I see two more 25-basis-point hikes in the target range over the four remaining meetings this year as necessary to keep inflation moving toward our target," he told an audience in New York, according to prepared remarks.

Waller said he had backed last month's pause due to "lingering doubts about when or if an abrupt tightening of credit conditions would occur," following banking stresses in March.

"I felt that waiting another six weeks was prudent risk management," he added.

Waller said data published since June has made him more confident that the banking crisis will not lead to "significant" problems for the American economy.

"I see no reason why the first of those two hikes should not occur at our meeting later this month," he added.

Waller's remarks come a day after the Fed published a report indicating that "overall economic activity increased slightly since late May."

Futures traders assign a probability of more than 90 percent that the Fed will raise its benchmark lending rate by another quarter percentage-point on July 25-26.

This would bring its key lending rate to its highest level in more than two decades.

Agence France-Presse

Bitcoin falls below $30,000, lowest since July 2021

TOKYO - Bitcoin slumped below $30,000 for the first time since July 2021 on Tuesday as cryptocurrencies track sinking markets with investors spooked by aggressive US monetary tightening and surging inflation.

The world's largest cryptocurrency by market value fell as low as $29,764 in Tuesday trade, before recovering above $30,000, extending a recent collapse in price as investors desert assets viewed as risky.

Bitcoin's value has more than halved since a November surge that saw the token hit a record of nearly $69,000.

While crypto enthusiasts view bitcoin as a hedge against inflation, an influx of more traditional investors tend to view it as a riskier asset.

They have been offloading bitcoin and other digital tokens along with other volatile assets like tech stocks as the US Federal Reserve moves to hike interest rates to tackle decades-high inflation.

"Bitcoin is breaking below some key technical levels as the never-ending selloff on Wall Street continues," said Edward Moya, senior market analyst for the Americas at Oanda.

"The institutional investor is paying close attention to bitcoin as many who got in last year are now losing money on their investment," he added.While the token's "long-term fundamentals have not changed in months", concerns about growth and a possible recession are creating "a very difficult environment for cryptos", Moya said.

"No one is looking to buy the crypto dip just yet and that leaves bitcoin vulnerable here."

The slump in crypto follows dives on US equities and other markets, with the tech-rich Nasdaq closing down 4.3 percent on Monday, the S&P 500 declining 3.2 percent and the Dow ending off 2.0 percent.

Agence France-Presse

Asia tracks Wall St losses on Fed tightening concerns

HONG KONG - Asian stocks opened with losses on Monday, as unease lingered over tightening monetary policy by the Fed and investors awaited earnings reports by retailers due this week.

Wall Street stocks mostly fell Friday. Both the S&P 500 and the Nasdaq retreated as the yield on the 10-year US Treasury note climbed above 2.7 percent, a signal markets are preparing for more tightening as the Federal Reserve battles inflation.

The losses continued Monday in Tokyo, as well as in Hong Kong and Shanghai where the main indexes lost more than two percent.

Taipei and Seoul were also down, while Sydney and Jakarta posted slight gains.

"Stocks are soft at the Monday open on increasing evidence the Federal Reserve will take a more committed approach to its monetary policy inflation-fighting stance," said Stephen Innes at SPI Asset Management.

"However, markets have been surprisingly resilient as discussions under the surface debated whether this week's US March CPI data will hint at the peak of the inflation cycle and help the Fed's chance to better engineer a soft landing, however narrow that path may seem."

And Takashi Hiroki, chief strategist of Monex, added: "Focus this week is on the US and Chinese consumer price indexes for March," among other data, to glean clues on the Fed's monetary policy and that of other central banks.

The US central bank has recently taken a hawkish tone as it embarks on an aggressive tightening path, prompting traders to fret over the prospect of higher interest rates.

The euro climbed as much as 0.7 percent against the dollar before paring the gain, suggesting some relief over the French election but ongoing wariness.

Investors had fretted about the implications of a victory for President Emmanuel Macron's nationalist rival Marine Le Pen in the midst of the war in Ukraine, given her long-standing sympathies for Russia.

Macron was set to beat Le Pen in the first round of elections Sunday by a larger-than-expected margin, the two candidates advancing to a run-off later this month.

"Make no mistake: nothing is decided," Macron told supporters.

Agence France-Presse

Federal Reserve ramps up help to US economy on life support

WASHINGTON - The Federal Reserve launched an unprecedented effort on Monday to flood the US economy with money amid the chaos caused by the coronavirus pandemic, as Congress debated a rescue plan for American workers and companies.

Like patients around the world battling the disease itself, the US economy is on life support, with some forecasters projecting a 14 percent contraction in the April-June quarter while the global economy could shrink 1.5 percent this year.

About a third of Americans have been ordered to stay at home, and the Fed warned of "severe disruptions" from the virus as it rolled out another series of measures to pump funds into the economy, including buying unlimited amounts of government debt -- a move akin to printing money.

But while that should provide oxygen to the financial system and keep businesses open, lawmakers continued haggling over an emergency aid package, with Democrats in the House unveiling a proposal that would cost a whopping $2.5 trillion as they demanded more funds to help workers directly and more strings on any aid going to corporations.

President Donald Trump signaled his approval of the Fed's move last weeks to slash the benchmark lending rate to zero, saying central bank chair Jerome Powell had "done a really good job," in a reversal of previous criticism over his refusal to lower rates.

The president also praised the strong US dollar but acknowledged it makes "trade much tougher" -- an unusual statement from an American president, who typically don't comment on the currency's value.

Treasury Secretary Steven Mnuchin spent the day meeting with congressional leaders, and played down Democratic concerns about taxpayers coming to the rescue of major corporations. 

"I want to be clear, there are no bailouts," he said on Fox Business Network. "This isn't corporate welfare. This helps all American workers."

EXISTENTIAL THREAT

Mnuchin said the Fed's measures would provide $4 trillion in needed liquidity into the US economy.

The Fed had already announced it would buy at least $500 billion of Treasury debt as well as $200 billion of mortgage-backed debt, but now has committed to buying "in the amounts needed to support smooth market functioning." 

The Fed's New York branch, which handles the financial transactions, said it would start out by purchasing $75 billion per-day in Treasuries and $50 billion per-day in mortgage-backed securities.

In the latest action, the Fed revived facilities it last used during the 2008 global financial crisis, and expanded others announced in recent days, including buying debt issued by US municipalities and by corporations. 

In addition, the Fed said it would soon unveil a program to lend directly to small- and medium-sized companies -- those that have been hardest hit by the near complete shutdown of the US economy as authorities fight to contain the spread of the virus.

"While great uncertainty remains, it has become clear that our economy will face severe disruptions," the Fed said in a statement, pledging to use all available tools to contain the damage.

"Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate."

CONGRESSIONAL INTERVENTION

Economists praised the effort, but said massive stimulus from Congress is still needed.

"The downturn is not avoidable. The economic carnage associated with downturn can be mitigated so that there is an economy left to ramp up," said Diane Swonk, chief economist at Grant Thornton.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, offered an equally dire warning: "The near-term threat to the economy is existential."

The central bank actions represent "an all-out effort to ensure that the business sector can continue to exist even as economic activity temporarily collapses. The Fed is now effectively the direct lender of last resort to the real economy, not just the financial system."

The central bank pledged to "continue to use its full range of tools to support the flow of credit to households and businesses."

One of the programs, the Term Asset-Backed Securities Loan Facility (TALF), will help backstop recent student loans, car loans and credit card debt as well as small business loans.

Agence France-Presse

World stocks surge on Fed pledge to pause, dollar slips

NEW YORK -- The dollar slid and equities surged on Wednesday, fueled by Boeing and Apple's results and extended after the Federal Reserve pledged to be patient with future interest rate hikes, a change in tone that stock investors interpreted as a buy signal.

The Fed, in its policy statement at the end of a two-day meeting, struck the language from its December policy statement that indicated further rate hikes would be appropriate in 2019. That language had roiled markets amid signs of slower global growth.

US stocks extended gains and bond yields fell as markets got what they were hoping for, said Mohamed El-Erian, chief economic adviser at Allianz in Newport Beach, California. "This marks a full 180 from what the Fed was signaling just a few months ago," he said.

Scott Minerd, global chief investment officer at Guggenheim Partners in Santa Monica, California, said the Fed's pause would further extend the economic expansion, allowing excesses to continue to build and increasing risks of financial instability.

"The Fed refilled the punch bowl and the party goes on. Buy risk assets," Minerd said.

The Fed's policy statement indicates the US central bank will remain on a dovish path, which is very supportive for risk assets, at least on the short term, said Putri Pascualy, managing director for PAAMCO in Irvine, California.

"The back-drop of slowing economic growth on a global basis is the 800 trillion gorilla in the room," Pascualy said.

The MSCI world equity index, which tracks share performance in 47 countries, rose 1.2 percent following gains in Asia overnight. The FTSEurofirst 300 index of leading shares in Europe closed up 0.41 percent.

The Dow Jones Industrial Average rose 434.9 points, or 1.77 percent, to 25,014.86. The S&P 500 gained 41.05 points, or 1.55 percent, to 2,681.05, and the Nasdaq Composite added 154.79 points, or 2.2 percent, to 7,183.08.

Upbeat results from Boeing and Apple late on Tuesday provided investors early relief.

Boeing shares rose 6.25 percent after the world's largest planemaker raised its profit and cash flow expectations for 2019 amid a boom in air travel. Boeing also indicated it had overcome supplier delays that snarled 737 production last year.

Apple results provided some reassurance as the iPhone maker reported sharp growth in its services business. Its shares gained 6.83 percent

Oil prices rose, paring gains of more than 1 percent, as the potential for supply disruptions following US sanctions on Venezuela's oil industry lifted prices.

Stocks listed in London jumped more than 1 percent after British lawmakers late on Tuesday rejected a proposal in Parliament that aimed to prevent a potentially chaotic "no-deal" Brexit, a vote that initially pushed sterling sharply lower.

The exporter-heavy FTSE 100 in London rose 1.45 percent as its components often are boosted by a weaker pound because its multinational companies earn a large portion of their revenue abroad in foreign currency.

Sterling rose 0.04 percent to $1.3071 after sliding about 0.7 percent against the dollar and the euro following parliamentary votes on Brexit.

"The vote is not fundamentally changing the way the market's talking about Brexit," said Hetal Mehta, Legal & General Investment Management senior European economist.

Payrolls processor ADP reported that the US private sector added 213,000 jobs in January, which beat forecasts for gains of 178,000. But the monthly total was lower than the 271,000 jobs added in December.

The dollar index fell 0.39 percent to 95.447. Against the yen, the dollar fell 0.33 percent to 109.02.

The euro gained 0.39 percent to $1.1475.

Benchmark 10-year U.S. Treasury notes rose 6/32 in price to push yields down to 2.6900 percent.

US West Texas Intermediate crude futures gained 92 cents to settle at $54.23, while international Brent crude futures rose 33 cents to settle at $61.65 per barrel.

source: news.abs-cbn.com

In a shift, Fed will be 'patient' on future US rate hikes

WASHINGTON - The US Federal Reserve on Wednesday held interest rates steady and, in a formal policy shift, vowed to be patient in further lifting borrowing costs, the clearest signal yet the tightening cycle it began in 2015 may have ended.

Citing rising uncertainty about the US economic outlook, Fed Chairman Jerome Powell said the case for raising rates had "weakened" and, in a statement, the US central bank dropped its earlier expectation for "some further" tightening.

The Fed also shifted to a more dovish stance on its ongoing shedding of assets, saying it was prepared to adjust its plans based on economic and financial developments.

Powell, speaking to reporters after the end of the Fed's latest 2-day policy meeting, said the central bank would likely stop trimming its $4.1 trillion balance sheet sooner, leaving it with more assets than previously expected.

"The situation now calls for patience," he said, referring to the prospect of further rate hikes. "I think it's the right thing. I feel strongly that it is."

Taken together, the balance sheet announcement and the shift on rate hikes was meant to convey maximum flexibility from a central bank buffeted in recent weeks by financial market volatility, signs of a global economic slowdown and a partial US government shutdown that clouds the economy.

"This marks a full 180 from what the Fed was signaling just a few months ago," said Mohamed El-Erian, chief economic adviser at Allianz, in Newport Beach, California.

After the Fed statement, US stocks added to gains with the S&P 500 index rising 1.5 percent, while the dollar and short-term yields fell as investors gauged an even lower probability of additional rate hikes any time soon.

Market expectations of future rates fell further. Contracts tied to the Fed's policy rate continued to price about a one-in-4 chance of a hike in 2019, and contracts maturing in 2020 were signaling a small but rising chance of a rate cut then.

The Fed's policy statement left its overnight benchmark lending rate in a target range of 2.25 percent to 2.50 percent.

The US central bank said continued economic and job growth was still "the most likely" outcome. But it removed language from its December policy statement that risks to the outlook were "roughly balanced."

CLOUDIER OUTLOOK

The Fed raised rates 4 times last year including in December, when it signaled it would do so twice more this year.

The economic outlook, however, has become more clouded as a result of recent volatility in financial markets and signs that growth is slowing overseas, including in China and the euro zone. There are also fears the 35-day partial shutdown of the US government may crimp consumer spending.

"In light of global economic and financial developments and muted inflation pressures, the committee will be patient" in determining future rate hikes, the Fed's rate-setting committee said in the policy statement.

The Fed made no change to the $50 billion maximum monthly runoff of Treasury bonds and mortgage-backed securities from its balance sheet. Some traders have urged it to slow or halt its pullback from the bond markets, at least for now.

In a separate statement, the Fed that it had decided to continue managing policy with a system of "ample" reserves, reinforcing the notion that the rundown may end sooner than expected.

"Overall this signals the Fed will not be on autopilot going forward," said Justin Lederer, Treasury analyst at Cantor Fitzgerald in New York.

The downgrade in the Fed's language around rate increases included a change in its description of economic growth from "strong" to "solid," and it noted that market-based measures of inflation compensation have "moved lower in recent months."

The Fed's policy decision was unanimous.

source: news.abs-cbn.com

US Fed raises rates, sees at least 3 more years of economic growth

WASHINGTON - The Federal Reserve raised interest rates on Wednesday, as expected, and forecast three more years of economic growth as the US central bank left its policy for steady rate rises in place.

In a statement that marked the end of the era of "accommodative" monetary policy, Fed policymakers lifted the benchmark overnight lending rate by a quarter of a percentage point to a range of 2.00 percent to 2.25 percent.

The Fed still foresees another rate hike in December, three more next year, and one increase in 2020.

That would put the benchmark overnight lending rate at 3.4 percent, roughly half a percentage point above the Fed's estimated "neutral" rate of interest, at which rates neither stimulate nor restrict the economy.

"The thing that folks were watching for, which they went ahead and did, was remove the word 'accommodative' in regard to their monetary policy," said Michael Arone, chief investment strategist at State Street Global Advisors.

"It does seem to potentially indicate they believe monetary policy is becoming less accommodative and getting more towards that neutral rate."

That tight policy stance is projected to stay level through 2021, the time frame of the Fed's latest economic projections.

The dollar lost ground against the euro after the release of the policy statement, the US Treasury yield curve flattened and stocks rose.

The Fed sees the economy growing at a faster-than-expected 3.1 percent this year and continuing to expand moderately for at least three more years, amid sustained low unemployment and stable inflation near its 2 percent target.

"The labor market has continued to strengthen ... economic activity has been rising at a strong rate," the Fed said in its statement, which removed its longstanding reference to the fact that monetary policy remained "accommodative."

It inserted no substitute language for the phrase, which had been a staple of its guidance for financial markets and households for much of the past decade. The wording had become less and less accurate since the central bank began increasing rates in late 2015 from a near-zero level, and its removal means the Fed now considers rates near neutral.

The rate hike was the third this year and the seventh in the last eight quarters. Ahead of Wednesday's statement, traders put the chance of a rate increase at 95 percent, according to CME Group.

Fed Chairman Jerome Powell, who took over as head of the central bank earlier this year, is scheduled to hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the policy statement and the Fed's latest two-day meeting.

NEW PROJECTIONS

The Fed's latest projections show the economy continuing at a steady pace through 2019, with gross domestic product growth seen at 2.5 percent next year before slowing to 2.0 percent in 2020 and to 1.8 percent in 2021, as the impact of the recent tax cuts and government spending fade.

Inflation was forecast to hover near 2 percent over the next three years, while the unemployment rate is expected to fall to 3.5 percent next year and remain there through 2020 before rising slightly in 2021.

The jobless rate is currently 3.9 percent.

With risks described as roughly balanced, the statement left the Fed on a steady course for the next year.

Risks to the current run of economic growth, such as the threat of a damaging round of global tariffs increases, were largely set aside.

There were no dissents in the Fed's policy statement. 

source: news.abs-cbn.com