Federal Reserve Expected to Hold US Interest Rates Steady

Fed could trigger stock sector rotation

That in turn may push bond prices higher. This demand propels the economy forward.

The energy index's 0.75 percent rise led eight of the 11 major S&P advancers. But others are more concerned about financial market risks that could build up if rates remain low too long.

Other names being floated: Glenn Hubbard, dean of Columbia University's business school; John Taylor, a professor at Stanford University; Kevin Warsh, a former Fed governor; and Neel Kashkari, the president of the Minneapolis Fed who Wessel describes as a "dark horse".

They can walk you through the same process, clarifying any questions you may have, and let you know what your custom rate quote is.

The Fed, which holds a policy meeting this week and is set to begin unwinding the purchases as soon as next month, says they were needed to rescue the United States economy from an even deeper recession in 2007-2009 and to put it on a steady course in the years since. Core PCE inflation has fallen from 1.6% in Mar/Apr to 1.4% in July.

The Stoxx Europe 600 Index was virtually unchanged after erasing earlier declines. Gross domestic product is now expected to grow at a rate of 2.4 percent this year, 2.1 percent next year and 2.0 percent in 2019. At the start of 2016, the FOMC clarified that its 2 percent inflation target was "symmetric", meaning it would resist inflation that was too low, as well as too high. The tech-heavy index set a record for the 49th time in 2017 and is now up 20% year-to-date. Inflation has stalled, and prices are now rising just 1.4 per cent annually. Unemployment has fallen to around a 16-year low on her watch without sparking the runaway inflation that some feared. "Today's August data should be consistent with that underlying trend", said Adam Cole, chief currency strategist at RBC Capital Markets, in a note.

FOREX: The U.S. dollar gains, with the dollar index.DXY up 0.5 percent versus down 0.2 percent just before the announcement. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further. It now projects even faster growth this year of 2.4 percent, an increase from it forecast of 2.1 percent earlier this year. Trump has more recently suggested he'd consider rehiring Yellen for another term, saying she's "done a good job".

On its Treasury holdings it will decrease first by $6bn per month, increasing in steps of $6bn at three-month intervals until reaching $30bn per month. Some 71 percent of 42 economists in a Bloomberg News survey conducted September 12-14 expect the Fed to announce when it will start the runoff at the conclusion of its meeting Wednesday. In reality, their internal discussions are a matter of when, not if, the next hike will be.

Her to-do list is full: A possible third rate hike in 2017. The impact should be gradually absorbed. Banks benefit from higher rates, which can translate into higher profits from lending money.

The other reason the Fed may not raise its fed funds rate this week: Hurricanes Harvey and Irma are expected to ding the US economy in the short-term. Markets do not expect the Fed to raise short term rates this week, and increasingly it is seen as not hiking again this year. In fact, the current implied probability of a December rate hike is only 41 percent.

"This implies that in the absence of inflation, there may be little need for additional Fed rate hikes to tighten financial conditions", says Patel. Unfortunately, it does highlight a credibility gap in recent years for the Fed to accurately predict inflationary outcomes. The Fed has modestly raised the rate four times since December 2015 after keeping it at a record low for seven years after the 2008 financial crisis.

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