Fed set to reduce bond portfolio — Business briefing

Fed set to reduce bond portfolio — Business briefing”

Yellen says she intends to serve out her four-year term. Yellen, whose term ends in February, has repeatedly deflected all questions on this topic and will probably do so again.

Yellen's tenure as chairwoman expires in February, and President Trump is still considering whether to retain or replace her. The only other potential choice for Fed chair Trump has mentioned is Gary Cohn, a former Goldman Sachs executive who leads the president's National Economic Council.

The clock is ticking on Trump to pick a Fed chair and provide a continuity in leadership.

"What we need to figure out is whether the factors that have lowered inflation are likely to prove persistent", she said.

In the Fed's June projections, the median estimate of the long-run level of unemployment consistent with stable inflation was 4.6 percent.

The actions by Fed policymakers Wednesday demonstrated their confidence that the hurricanes will not cause long-term economic damage in the U.S. Look for the Fed's statement and a news conference at 11 a.m. ...

Now, with a much stronger economy, Fed officials are expected to announce a starting date to begin allowing the bond holdings to shrink gradually. It has also trimmed its inflation forecast.

The yield on the benchmark 10-year U.S. Treasury note increased to 2.273%, compared with 2.238% ahead of the announcement.

The central bank also expects inflation will remain stubbornly low. The Russell 2000 index of smaller-company stocks was up 5 points, or 0.4 percent, to 1,445.

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 per cent over time.

The Fed said on Wednesday it would begin the years-long process of trimming its $4.5 trillion in assets, majority amassed to encourage investment and growth in the wake of the 2007-09 financial crisis and recession. Investors will also be listening for any update on the timing of another increase to the Fed's key interest rate. The Fed remains on track to raise its benchmark fed funds rate three times in 2018, but it only pegged two further rates in 2019 instead of three.

The balance sheet primarily consists of government and mortgage-backed bonds. If the Fed were to coalesce around that belief, doubts could arise about whether it should keep raising rates or delay further hikes.

As gasoline prices increased following the hurricanes, inflation could rise, but only temporarily, the Fed noted.

The portfolio now is dominated by some $4.2 trillion of U.S. Treasury and mortgage-backed securities acquired in a bid to restrain long-term interest rates and support the economy's recovery from the 2007-2009 global financial crisis.

The pan-European FTSEurofirst 300 index closed up 0.1 percent, while MSCI's gauge of stocks across the globe gained 0.20 percent.

The dollar built on gains against the yen Thursday after the Federal Reserve unveiled plans to wind down its crisis-era stimulus and hinted at another interest rate hike before the end of the year.

Asian stock indexes were little changed, with Japan's Nikkei up 0.1 percent, while in Europe Germany's Dax was 0.2 percent higher.

An early flurry of activity saw the euro pop to a near two-year high versus the Japanese yen of 134.14 yen EURJPY= .

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