Economy

Treasury Yields, Dollar Surge as Fed Raises Odds of December Rate Hike

Treasury Yields, Dollar Surge as Fed Raises Odds of December Rate Hike”

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

Add it all together and the message is this: The Fed is simply unwilling to see just how low the unemployment rate can go without stoking higher inflation.

US central bankers are counting on steady growth and low unemployment to raise inflation closer to their goal, which would support their policy of gradual tightening through interest-rate increases and a reversal of quantitative easing.

This was when the markets became spooked about a Federal Reserve asset sale plan and a fear of rising rates that might overload the ability of the markets to absorb all that new supply. There was no financial market reaction to news that the second-quarter current account deficit was narrower than economists were expecting. Investors will also be listening for any update on the timing of another increase to the Fed's key interest rate.

The stronger dollar against the yen buoyed exporters on Tokyo's Nikkei, with the index up 1.5 percent by the break as traders also returned from a three-day break to play catch-up with Monday's global rally.

Despite subdued inflation, the Fed remained firm on raising the policy rate.

It also said it will hold benchmark interest rates steady, and signalled a rate hike by the end of 2017. As the jobless rate improved, interest rates have been raised, but remain below historic averages.

U.S. Treasury yields reached more than a two-month high after the U.S. Federal Reserve said it would begin reducing its $4.5 billion balance sheet starting in October. The portfolio primarily consists of government and mortgage-backed bonds.

-The yield on 10-year Treasuries advanced two basis points to 2.27 percent, the highest since July. Tata shares rose 1.7 percent.

In its policy statement, the Fed took note of Harvey, Irma and Hurricane Maria, which it said had devastated many communities.

Sept 20 (Reuters) - The S&P and the Dow were little changed on Wednesday but hovered near record levels as investors waited to hear from the Federal Reserve on future interest rate hikes this year while the tech-heavy Nasdaq was pulled lower by a drop in Apple. Homebuilder confidence came in weaker than expected this morning.

Markets anticipated the balance sheet unwinding and have been quiet so far on Wednesday. The Dow gained 63.01 points, or 0.3 percent, to 22,331.35.

WALL STREET: The S&P 500 index rose 3.64 points, or 0.1 percent, to 2,503.87.

The question of when and how the Fed will manipulate its main policy lever - its target for short-term rates - in coming months is less clear. Members of the Fed's policy-setting committee are eyeing one more increase to the federal funds rate this year, likely at the December meeting. MSCI's index of world stocks was last up 0.2 percent and hit an intraday record high of 487.07.

In Europe, Germany's DAX and the CAC 40 in France were both flat.



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