the Fed-head Janet Yellen. Photo: AP
NEW YORK. the Dow Jones bounced up at a new record high after the Federal Reserve, as expected, announced that the central bank raises its key interest rate 25 basis points. U.s. interest rates rose and the dollar ticked a bit higher minutes after the announcement. Shortly afterwards, however, fell the stock markets again.
the Fed notes that the job market has continued to be strengthened, the economic activity increased "at a moderate pace" since the end of June, the new job has continued to come and the consumption of households has grown decently. The central bank indicates three raises in 2017, against the previous two. The Fed-head Yellen believes, she says, that inflation is on a steady if slow way upwards towards the 2% target.
– There are a number of factors we take in. The lower the rate of unemployment is one such. Some members of the executive board, but not all, are counted also in any changes in fiscal policy, said the Fed-head Janet Yellen at a press conference afterwards.
” Our decision to raise should certainly be interpreted as a proof of our confidence in the economy, which has proven to be very durable, she continued.
The new key rate, the Fed funds rate, ends up in the range of 0.50-0.75 per cent. All members who participated in Wednesday’s meeting of the Federal Open Market Committee, the FOMC, stood behind the decision to slow down the economy, the second increase since the financial crisis, close enough bottenfrös the world’s financial markets eight years ago.
at the same time as the FOMC’s interest rate announcement was broadcast from Washington, so was Donald Trump and his future vice-president Mike Pence, a meeting in the Trump Tower in New York city with the directors of some of AMERICA’s largest technology companies. Among other ehandelsjätten Amazon ceo and founder Jeff Bezos was there.
Trump has the weeks after the election on november 8, publicly accused, among others, the aerospace and försvarsjätten Boeing to take on well paid. But he is also keen to get the united states’s corporation for that he designs the details of its economic policy.
And more, than the interest rate itself so it is Trump and the Fed’s views on him, that control the market reactions around the Fed right now.
Yellen ducked several questions about what the Fed thinks about the future president’s announced tax cuts.
– I really can’t generalize it, ” said Yellen at a direct question.
But, she noted, at the same time that the central bank is expected to manage the impact of Trump’s politics, whatever they may be.
” We act under a cloud of uncertainty at the moment, and we must await and see what changes in fiscal policy that are made, and how we should act, then, said Janet Yellen told reporters in Washington.
The fill investors with confidence in the future is largely Trumps the promise of huge investments in infrastructure, such as roads, bridges and new tunnels. It is running more than a couple of miles on an american highway knows that the need is great.
What, at least yet, don’t worry Wall Street seems to be how the investments will be financed. To pull together private funding is a possibility, but it is far from certain that investors are particularly keen on such high-risk projects.
another variation is expanded borrowing by the state, which together with Trumps lower taxes reasonably should result in growing budget deficit and rising public debt next year. It can provide reduced economic activity, which the Fed in this case are forced to deal with.
” I’m not looking to give advice to the next administration, and there are many considerations that congress must take into account. But I want to stress that it is important to continue with policies that create economic activity, ” said Yellen.
– And I am a strong supporter of an independent central bank, she noted shortly afterwards as answer to a question about Donald Trump’s repeated tweets about everything from the Fed to individual companies.
another question analysts are asking themselves, given an unemployment rate that is close to what economies call the full employment and rising interest rates, if the Fed have already been left behind in the monetary policy. Some conclude that the central bank’s forecast of three rate increases over the next year, against the previous two, is a sign that the central bank is trying to catch up.
But regardless of the risks, and the uncertainty for the Fed as Donald Trump’s next administration constitute so is there a sort of feeling of relief that flows from the Fed’s interest rate announcement on Wednesday. After a year that has delivered a string of missed chances so the Fed is now a small but clear step towards a normalisation of monetary policy. It has both the Fed and Wall Street expected since stödköpen of government and mortgage bonds, "quantitative easing", avlutades for more than a year ago.
“We believe that economic development allows step-by-step increases of the policy rate in the future,” said Yellen and indicated a monetary policy that is expected to be more active in 2017 than it has been this year.
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