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Fed raises rates as job gains, firming inflation stoke confidence (by Howard Schneider & Jason Lange)
Reuters - The U.S. Federal Reserve raised interest rates on Wednesday for the second time in three months, a move spurred by steady economic growth, strong
job gains and confidence that inflation is rising to the central bank’s target. The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75
percent to 1.00 percent marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing. However, the Fed’s
policy-setting committee did not flag any plan to accelerate the pace of monetary tightening.
Here’s what changed in the new Fed statement (by Berkeley Lovelace Jr.)
CNBC - This is a comparison of Wednesday’s FOMC statement with the one issued after the Fed’s previous policy-making meeting on Feb. 1. Text removed from the
February statement is in red with a horizontal line through the middle. Text appearing for the first time in the new statement is in red and underlined. Black text
appears in both statements.
Bill Gross: This could cause ‘hell’ to break loose in the global bond market (by Michelle Fox)
CNBC - While the Federal Reserve is gradually raising interest rates in the U.S., the actions by two other central banks are actually the most important thing to watch
right now, bond guru Bill Gross told CNBC on Wednesday. And it is something that could possibly wreak havoc on the bond market, he said. That’s because monetary
policy in both Europe and Japan is causing international investors to buy U.S. Treasurys, he explained. The European Central Bank is currently buying 80 billion euros
($85.7 billion) a month in bonds and Japan’s 10-year is pinned at zero to 10 basis points, said Gross, who runs the Janus Global Unconstrained Bond Fund.
With no recession on the horizon, we’re full speed ahead, Doubleline’s Gundlach says (by Berkeley Lovelace Jr.)
CNBC - DoubleLine Capital CEO Jeffrey Gundlach said Wednesday that the Federal Reserve’s influence has sharply increased, and that he sees no recession on the
horizon. “The bond market is listening. The influence of the Fed has greatly increased and the market, it is getting kind of old school where the market listens to what
the Fed says,” Gundlach said on CNBC’s “Halftime Report.” The Federal Open Market Committee is scheduled to release its meeting statement at 2 p.m., ET. Fed
Chair Janet Yellen is scheduled to hold a news conference at 2:30 p.m. Traders widely expect the central bank to raise interest rates.
Why the Fed Raised Rates for the Third Time (by Karl Russell)
New York Times - After widely signaling its intentions, the Federal Reserve raised its benchmark interest rate one quarter of one point. In the Fed’s view, the economy
is growing quickly enough and should not accelerate. However, the increase to the target rate is minor and all types of interest rates remain very low. The Fed lowered
its target rate — the rate banks charge each other to borrow money overnight — to near zero following the financial crisis of 2008 to encourage lending and spur the
economy. At the end of 2015, the Fed began raising rates in an effort to moderate the quickening economy.
The Fed just hiked rates for the 3rd time — that has a history of signaling a ‘major cyclical top for stocks’ (by Akin Oyedele)
Business Insider - The stock market could be about to stumble. Higher interest rates are generally viewed as bad for the stock market. And with the Federal Reserve
announcing its third rate hike since December 2015, stocks could fall, if history is anything to go by. “Many are familiar with the Wall Street adage ‘3 Steps and a
Stumble,’ popularized by Marty Zweig, for the tendency of stocks to sell off after the 3rd Fed rate hike in the cycle,” said Nautilus Investment Research’s Tom Leveroni
and Shourui Tian. The effect of a Fed tightening cycle is different for various sectors.
Fed hike will cost consumers $1.6 billion in credit card interest (by Jessica Dickler)
CNBC - For the 157 million Americans who carry a balance on their credit cards, Wednesday’s Fed action is bad news. With credit card debt rising steadily, the
quarter-percentage-point increase in the federal funds rate will cost consumers roughly $1.6 billion in extra finance charges in 2017, according to a WalletHub
analysis. “The cumulative effect of interest rate hikes is going to begin mounting,” said Greg McBride, Bankrate.com’s chief financial analyst, particularly on variablerate loans such as credit cards, home equity lines of credit and adjustable-rate mortgages, which could rise within one to two statement cycles.
Can Wall Street Handle Higher Interest Rates? (by Anthony Mirhaydari)
Fiscal Times - The Federal Reserve just raised interest rates for the second time in three months, signaling a dramatic quickening of its prior pace. For the first time in
more than a decade, Fed policymakers are turning increasingly hawkish out of concern over ongoing labor market tightening, evidence of building inflationary
pressure and the surge of business, consumer and investor sentiment following the surprise election of President Donald Trump. This hawkish turn — a typical
late-cycle move by central banks — is made unique by the fact that Wall Street has surged in recent years thanks to an unprecedented monetary stimulus.
Trump and the Fed are throwing a party for banks (by Paul R. La Monica)
CNN Money - It’s a good time to be a banker. President Trump is expected to roll back some of the financial regulations that were put into place during the Obama
administration. And the Federal Reserve is expected to give banks another gift Wednesday in the form of an interest rate hike. Higher rates tend to make loans to
people and businesses more profitable for big banks. That’s made investors giddy. Bank of America’s (BAC) stock has soared 15% this year. JPMorgan Chase (JPM)
is up 6% and not far from an all-time high. So is scandal-ridden Wells Fargo (WFC).
Why the Fed Hike Was Just What Oil Needed (by Crystal Kim)
Barron’s - On Wednesday the Federal Reserve raised base interest rates by 25 basis points, surprising literally no one. Probability of a hike was all but certain in the
weeks preceding this week’s meetings. United States Oil (USO) and iPath S&P GSCI Crude Oil ETN (OIL) is up 1.7% and 2.3%. Meanwhile Energy Select Sector
SPDR ETF (XLE) is up 2%. If the Fed had raised rates higher or indicated that they would raise rates faster, the dollar would have shown strength, and because
commodity prices tend to be inversely correlated with the dollar, gold and oil would have suffered. But that’s not what happened.
Inflation is back, but economy remains weak (by John W. Schoen)
CNBC - If the Federal Reserve had any doubts about raising interest rates, the government’s latest inflation data should help put them to rest. As Fed policymakers
wrapped up their latest two-day meeting, the central bank was widely expected to boost interest rates as the labor market continues to tighten and inflation moves well
into their longstanding target range. Despite the acceleration in price gains, though, the overall strength of the economy remains relatively weak. Fed policymakers got
the latest confirmation that inflation is heating up on Wednesday.
How the world’s central banks have set interest rates since the financial crisis - in one chart (by Patricia Scott)
Telegraph - The US Federal Reserve looks set to increase lending rates this afternoon after more than six years of low interest rates. After the financial crisis in 2008
central banks across the world cut their base lending rates to varying degrees, with some introducing negative rates of interest. The US Federal Reserve is set to
make an announcement regarding its base lending rate later this afternoon, when it is widely expected to increase interest rates. Expectations of an increase hinge
around the assessments of the Federal Open Markets Committee, which is responsible for deciding what level of interest is best for the US economy.
Trump might ease fuel economy rules, but automakers won’t be off the hook (by Chris Isidore)
CNN Money - President Donald Trump announced in Michigan Wednesday that he’s reconsidering tougher mileage requirements placed on the auto industry by the
Obama administration. But that doesn’t mean the automakers will be off the hook. Even if Trump’s EPA does relax fuel economy rules, the fact remains that separate
emissions regulations from California apply to about 35% of the nation. And those emissions rules effectively determine fuel economy regulations, since the fuel a car
burns generates emissions.
‘It’s getting worse’: An increasing number of Americans have stopped paying their car loans (by Matt Turner)
Business Insider - The number of Americans who have stopped paying their car loans appears to be increasing — a development that has the potential to send ripple
effects through the US economy. Losses on subprime auto loans have spiked in the last few months, according to Steven Ricchiuto, Mizuho’s chief US economist.
They jumped to 9.1% in January, up from 7.9% in January 2016. “Recoveries on subprime auto loans also fell to just 34.8%, the worst performance in over seven
years,” he said in a note. “It’s getting worse,” Ricchiuto told Business Insider. That could spell bad news.
Wall Street’s Bonus Pool Rises for First Time in Three Years (by Jennifer Surane)
Bloomberg - Wall Street’s bonus pool rose 2 percent to $23.9 billion in 2016, the first increase in three years, according to estimates by New York State Comptroller
Thomas DiNapoli. The bonus pool climbed as the industry added 3,800 jobs in New York City to reach 177,000, DiNapoli said Wednesday in a statement. The
average bonus was up 1 percent to $138,210, and pretax profits from the broker-dealer operations of New York Stock Exchange member firms jumped 21 percent to
$17.3 billion, the highest level in four years.
More Than 40% of Americans Are Wrong About Their Retirement Preparedness. Are You Among Them? (by Walter Updegrave)
Money - A new study by the Center for Retirement Research at Boston College (CRRBC) says that more than half of working-age Americans are at risk of seeing their
standard of living drop in retirement. No shocker there. Many surveys and studies show that many, if not most, workers are well behind when it comes to preparing for
retirement. What is surprising, though, is the number of people the researchers identified who believe they’re on track to a secure retirement but aren’t (according to
the researchers) and, conversely, how many are worried they’re falling short but are actually doing fine.