• FOMC MEETINGS 13-14 June, 2017
The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing U.S. economy and strengthening job market.
In lifting its benchmark lending rate by a quarter percentage point to a target range of 1.00 percent to 1.25percent and forecasting one more hike this year, the Fed seemed to largely brush off a recent run of mixed economic data.
The U.S. central bank's rate-setting committee said the economy had continued to strengthen, job gains remained solid and indicated it viewed a recent softness in inflation as largely transitory.
The Fed also gave a first clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.
It expects to begin the normalization of its balance sheet this year, gradually ramping up the pace. The plan, which would feature halting reinvestments of ever-larger amounts of maturing securities, did not specify the overall size of the reduction.
• Consumer prices unexpectedly fell on month in May and the annual increase in core CPI slipped to 1.7 percent, the smallest rise since May 2015, after advancing 1.9 percent in April.
• Retail sales fell 0.3 percent last month -- the largest fall since January 2016 and way below economists' expectations for a 0.1 percent gain -- amid declining purchases of motor vehicles and discretionary spending.
• U.S. consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, suggesting a softening in domestic demand that could limit the Federal Reserve's ability to continue raising interest rates this year. The data had knocked the dollar and U.S. bond yields to its lowest level in seven months against a basket of currencies.
The dollar index had fallen to as low as 96.323 on Wednesday, having shed nearly six percent on the year, before bouncing back a tad on the Fed's policy tightening.
The euro traded at $1.1210, after having hit a seven-month high of $1.1296. And the dollar fetched 109.35 yen, not far from Wednesday's eight-week low of 108.81 yen.
• The 10-year U.S. Treasuries yield had slipped to as low as 2.103 percent and last stood at 2.129 percent.
• The dollar nursed losses on Thursday as weak U.S. inflation data left investors wondering if the Federal Reserve would follow up its latest rate hike with another later this year.
Deepening political turmoil in Washington also weighed on the greenback, with the Washington Post reporting that U.S. President Donald Trump is being investigated by special counsel Robert Mueller for possible obstruction of justice.
Also on Wednesday, a prominent Republican was among those shot by a gunman said to be angry with Trump.
• U.S. President Donald Trump is being investigated by special counsel Robert Mueller for possible obstruction of justice, the Washington Post reported on Wednesday, citing unidentified officials.
Mueller is investigating alleged Russian interference in the 2016 U.S. presidential election and possible collusion with the Trump campaign. Former FBI Director James Comey told Congress last week he believes he was fired by Trump to undermine the agency's Russia probe.
• Crude oil prices slumped nearly 4 percent to their lowest close in seven months on Wednesday, hit by an unexpected large build in gasoline inventories and an international outlook that suggests a big increase in supply in the coming year.
Despite nearly six months of OPEC-led efforts to reduce a global glut, oil prices have not stabilized at higher levels as many had anticipated when the group agreed with other producers to cut supply back.
After rising for three consecutive days, U.S. West Texas Intermediate crude futures CLc1 fell $1.73, or 3.7 percent, to settle at $44.73 per barrel, its lowest close since Nov. 14. WTI has dropped 18 percent since its closing high of $54.45 in late February.
Brent LCOc1 also slumped, losing $1.72, or 3.5 percent, to settle at $47 a barrel. That was the lowest close for Brent since Nov. 29, the day before OPEC agreed to cut output.
Reference: Reuters
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