The Federal Reserve did acknowledge the downfall in inflation by saying they are monitoring inflation closely. However, it did not impact the decision: they raised rates.
In addition, they did change their forecast for interest rates: one more is expected for 2017 – no change in the dot plot.
The US dollar recovers the ground lost earlier in the day. Follow the live blog and video coverage.
Yellen’s press conference
In the press conference, Yellen provides excuses for low inflation: a fall in the price of prescription drugs and telephone bills. She says they are “one-offs”. By dismissing weak inflation, Yellen gives another boost to the dollar.
She says that the conditions are in place for inflation to move up. There is no undermining of inflation expectations. IS she correct? At the moment, inflation expectations are unchanged.
In addition, Yellen expresses confidence about the economy and sees further growth. This is partially linked to global growth. The hike reflects progress in the economy.
She provides an interesting comment on stocks: the Fed has “noticed that stocks are considerably higher” since the beginning of the year.
Regarding the balance sheet reduction, she wants it to be like “watching paint dry”.
- FOMC reaction: Another Hike In September Before Balance Sheet Unwind In December – CIBC
- FOMC Reactions: Balance sheet in September, hike in December – two opinions
Fed Live Blog – as it happened
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The Federal Reserve was widely expected to raise interest rates for the third time in the past six months. Why? It’s not the data, which doesn’t look. It’s actually what the Fed has guided us. However, the fall of inflation reported just hours before the publication, sent the dollar crashing down and cast some doubts about the move.
The big question is what’s next? Some answers are made available via the dot-plot, the statement and later with the press conference by Janet Yellen.
Follow the live video and live blog coverage below:
Fed Live Video Coverage – as it happened
Follow the live coverage with Valeria Bednarik:
- Fed Preview: 5 Things to watch out for in a “dovish hike”
- Fed Video Preview: Beyond the dovish hike: more rate rises, QT
- USD: Fed To The Rescue: Will The USD Rally Out Of FOMC? – NAB