Economy

Global stocks flat as investors await Fed meeting outcome

Global stocks flat as investors await Fed meeting outcome”

The dollar spiked against the pound following the indication of a further rate hike in 2017 - the United States central bank already having raised rates twice this year in March and June - which pushed the pound below the USD1.35 mark. Restoring the Fed's giant, $4.5 trillion portfolio of bonds and other assets, still bloated from the financial crisis, to normal levels.

Yellen's tenure as chairwoman expires in February, and President Trump is still considering whether to retain or replace her.

Yellen said policymakers would react accordingly to any negative impacts on the economy, adding that persistently low inflation would likely come to an end.

The question gained added importance since the Fed's No. 2, Stanley Fischer, announced this month that he will resign on October 13.

Although the Fed has not dramatically reassess its current strategy, the central bank did scale back its estimates of how high interest rates will rise.

"The central Spanish government's increasingly rigorous line of action in response to Catalonia's aspirations to independence triggered profit-taking on Spanish debt instruments, which subsequently spilled over to BTPs (Italian debt)", DZ Bank analyst Rene Abrecht said.

In the US, Wall Street ended mostly higher on Wednesday after the mid-afternoon decision NY time, with the Dow Jones Industrial Average closing up 0.2%, the S&P 500 closing up 0.1% and Nasdaq Composite ending down 0.1%. That means not too high, and not too low. Most participants lowered their outlook for growth from the storms this year but raised it for next year by a greater amount. Yellen said the disruptions could hurt the economy in the third quarter, boost growth in the fourth quarter and raise inflation temporarily owing to higher gas prices. If prices don't rise, wages don't either. Meanwhile, more Fed officials have grown concerned about the impact of low rates on markets.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation.

Deal-making and political turmoil in Spain livened up a flat session in Europe' stock markets on Wednesday as investors awaited pointers from the Federal Reserve on the USA interest rate outlook. Storm-related disruptions and rebuilding will affect economic activity in the near term, but past experience suggests that the storms are unlikely to materially alter the course of the national economy over the medium term. "The Fed wants to be careful when they begin the balance sheet normalization process and may not want to cloud the process with a December hike", wrote Mark Vitner, a managing director and senior economist at Wells Fargo Securities.

Despite many encouraging signs in the economy, Yellen is opting to go slowly to reduce the central bank's $4.5 trillion holdings. It's the first time the Fed has done this.



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