US consumer prices rise 0.5% in Jan; core CPI gains 0.3%, largest in a year

US consumer prices rose more than expected in January, with a measure of underlying inflation posting its biggest gain in a year, strengthening expectations that price pressures will accelerate this year and prompt a faster pace of interest rate increases from the Federal Reserve.

The fairly strong inflation report from the Labor Department on Wednesday could put more pressure on US financial markets, which were spooked by a surge in annual wage growth in January.

Inflation concerns sparked a sell-off on Wall Street and boosted benchmark U. S. Treasury yields to a four-year high.

There are fears that inflation, which is seen as being driven by a tightening labour market and increased government spending, could force the Fed to be a bit more aggressive in

Trump names 'safe' choice Jerome Powell to lead US Fed: 5 questions answered

ditor’s note: Markets breathed a sigh of relief after President Donald Trump named Jerome Powell his pick to be the next chair of the Federal Reserve. If confirmed, Powell – considered a “safe” choice – would take over from current Chair Janet Yellen in February, becoming one of the world’s most powerful people. So what’s the big deal? Economist Greg Wright explains why who leads the U.S. central bank matters to us all.

What does the Fed do?

The Federal Reserve oversees all banks and financial institutions based in the U.S., including branches of foreign companies, and also sets U.S. monetary policy.

The main way it does the latter is through its target interest rate. This benchmark influences the pace of economic growth, the level of employment and the price of goods, services and assets around the world. As the engine behind the world’s most important economy, the Fed’s influence is hard to overstate.

As a result, the Fed affects the likelihood that you – and millions of others around the world – will keep your job, will be able to afford a new home and will be able to retire when you want. And while most Fed decisions are made by a seven-member Board of Governors, the chair’s voice is by the far the most important. For this reason the Fed chair is sometimes referred to as the “second-most-powerful person in the world” – after the U.S. president
READ MORE

Jerome Powell rose to top of Trump's list as safe, savvy choice for Fed

Jerome Powell was not on President Donald Trump's early radar as a possible successor to Federal Reserve Chair Janet Yellen, and was angling instead for a job as the U.S. central bank's vice chair for supervision.

But when he was passed over for that position last summer, it was one in a chain of events that set the stage for the 64-year-old Fed governor and former investment banker to take over as head of the world's most powerful central bank.

Trump on Thursday nominated Powell to replace Yellen when her term expires in early February, saying at the White House that the 64-year-old lawyer and former investment banker has the necessary "wisdom and leadership."

Other contenders for the job fell for different reasons, as Trump soured on top White House economic adviser Gary Cohn, decided against renominating Yellen despite largely approving of her policies and came to view two others as posing risks to the economy, according to current and former Fed and government officials familiar with the decision.

In the end it was Powell, a Maryland native, avid cyclist, and guitar hobbyist, who checked all the boxes that mattered but carried none of the negatives.

If confirmed by the U.S. Senate, Powell would become the first person without an advanced economics degree to hold the job since William Miller in the late 1970s.
READ MORE

Decision today: Is Trump all set to pick Jerome Powell as next Fed chair?

President Donald Trump has informed Federal Reserve Governor Jerome Powell that he is the pick to replace Janet Yellen at the helm of the central bank, a media report said on Wednesday.

The Wall Street Journal report quoted two people familiar with the matter as saying Trump spoke to Powell yesterday to inform him of the decision.

If confirmed by the Senate, Powell would take over from Yellen when her four-year term as Fed chair expires in February. Powell has already been through that confirmation process in order to become a member of the Fed's board.

Yellen was a potential, though dark horse candidate, and earlier in the day Trump praised her as "excellent." But he has made clear in all his appointments he wants to put his own stamp on policy.

The choice marks the first time since Jimmy Carter's administration in the 1970s that a president has failed to reappoint the Fed chair named by his predecessor.

After months of public debate, analysts say Powell represented a middle-ground option for the president, who wanted to mark a departure from the Obama era, while markets prefer continuity and favoured Yellen who has presided over an era of low inflation and steady economic growth.

An attorney by training who has voted with the majority of Fed members since his appointment by Barack Obama in 2012, Powell was seen as a centrist, unlikely to pursue steep rate hikes but a probably more amenable to the Trump administration's deregulation agenda.
READ MORE

Watching inflation closely but economy is strong, says Janet Yellen

The US economy remains strong and the strength of the labour market calls for continued gradual increases in interest rates despite subdued inflation, Federal Reserve Chair Janet Yellen said on Sunday.

"We will be paying close attention to the inflation data in the months ahead," Yellen said in prepared remarks at an international banking seminar in Washington. "My best guess is that these soft readings will not persist."
Yellen also said she expected the US economy to exceed its long-term trend during the second half of the year and repeated the impact of recent hurricanes on the economy should be temporary.

The US central bank voted to hold interest rates steady at its last policy meeting in September. Since then, Yellen has repeatedly acknowledged rising uncertainty on the path of inflation, which has been retreating from the Fed's 2 percent target rate for much of the year.

Minutes from the meeting, released last Wednesday, showed policymakers had a broad debate about recent soft inflation and the impact on interest rates if it fails to rebound.

However, Yellen and some other key policymakers have also made plain they expect to continue to gradually raise interest rates given the strength of the overall economy and continued tightening of the labour market.
READ MORE

Spanish tensions keep Europe away from global stocks party

Global stock markets hit a record high on Wednesday with investors in exuberant mood in the United States overnight and in Asia later, but sentiment in Europe was soured by a political crisis gathering steam in Spain.

Tensions between Madrid and Catalonia have risen since the wealthy region held an independence referendum on Sunday that was tarnished by police violence.
The fallout from those clashes nudged Spanish stocks towards their biggest daily fall in more than a year on Wednesday, in turn dragging down other European bourses.

Catalonia would move as soon as this weekend to declare independence from Spain, the region's leader said.

"If you look at the European markets, the continued political worries in Spain is the main driver, and that uncertainty seems likely to continue if the regional government declares independence," Investec economist Ryan Djajasaputra said.

While world stocks hit a fresh record high, the pan-European STOXX 600 index was down 0.2 percent while Spain's IBEX fell as much as 2 percent, its biggest daily fall since August last year.
READ MORE

Wall Street opens flat as investors await Fed decision

Wall Street opened little changed on Wednesday as investors waited for the conclusion of the two-day Federal Reserve meeting for indications of a third interest rate hike this year.

The policy statement and projections are due to be released at 2 p.m. ET (1800 GMT). Fed Chair Janet Yellen will hold a press conference half an hour later, which will be closely watched for views on inflation.

The central bank is likely to keep interest rate unchanged and say that it will start unwinding its holdings of about $4.2 trillion in bonds and mortgage-backed securities.

"Fed will likely be a non-event, but if they are slightly more dovish in their language, I think you could see a reversal in the banks, but I don't see a lot of activity," said Aaron Clark, portfolio manager at GW&K Investment Management.

"The Fed is being extremely transparent, so they don't want to surprise the market with the normalization process."

The plan will limit the amount of maturing bonds used each month to purchase new ones. The initial cut will be $10 billion per month, probably beginning in October.

Inflation has remained stubbornly below the Fed's 2-percent target rate, but a recent data showed uptick in domestic consumer prices, which raised the chances of a December rate hike by more than 50 percent.
READ MORE

S&P, Dow hit new record highs as North Korea tensions ease

Wall Street hit new life highs after open on Monday lifted by industrials and financials stocks as tensions eased on the Korean peninsula and focus shifted to the Federal Reserve's meeting.

Caterpillar's 1.8 percent rise was the biggest boost on the Dow while the S&P and the Nasdaq were lifted by Nvidia's 3.6 percent increase.

A relatively quiet North Korea and U.S. Secretary of State Rex Tillerson's comments on "peaceful solution" over the weekend have calmed investors.

However, the tensions could be back in focus with U.S. President Donald Trump set to address world leaders at the United Nations on Tuesday.

The Federal Open Market Committee's two-day meeting starting on Tuesday is unlikely to result in an interest rate increase, but investors will focus on how Fed Chair Janet Yellen views recent inflation readings for clues on the timing of further rate hikes.

The central bank is also expected to announce plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities, nearly a decade after the global financial crisis.
READ MORE

Sterling surges to highest in a year on Bank of England rate hike warning

Sterling jumped after the Bank of England warned it could raise interest rates for the first time in a decade in the coming months while the dollar rose after above-forecast inflation data that could allow the Federal Reserve to hike for a third time this year.

Wall Street was set to open lower, index futures showed after the inflation data. Earlier, weak Chinese data had weighed on European and Asian shares and pulled an MSCI measure of world stock prices down from record highs hit on Wednesday.

Britain's blue-chip FTSE 100 share index fell sharply after the BoE warning, which followed a monetary policy meeting, and was last down 0.7 percent at a two-week low.

Policymakers kept rates unchanged at a record low 0.25 percent but warned a hike was likely to be needed in coming months if the economy keeps growing and inflationary pressures continue to build.

Britain's vote last year to leave the European Union has raised doubts about the long-term health of the economy and strong short-term inflationary pressures.

Sterling rose to as high as $1.3358, adding a cent and a half to touch its strongest in more than a year, and to 89.11 pence per euro after the decision.
READ MORE

US jobless claims rise by 3,000 amid tightening labour market

The number of Americans filing for unemployment benefits unexpectedly rose last week, but the underlying trend remained consistent with a tightening labour market. Initial claims for state unemployment benefits increased 3,000 to a seasonally adjusted 244,000 for the week ended Aug. 5, the Labor Department said on Thursday.

Data for the prior week were revised to show 1,000 more applications received than previously reported.

Economists polled by Reuters had forecast claims would be unchanged at 2,40,000 in the latest week. With the labour market near full employment, there is probably limited room for claims to continue declining.

Claims have now been below 300,000, a threshold associated with a healthy labour market, for 127 straight weeks. Thatis the longest such stretch since 1970, when the labour market was smaller. The unemployment rate is 4.3 percent.

Labor market tightness could encourage the Federal Reserve to announce a plan to start unwinding its $4.2 trillion portfolios of Treasury bonds and mortgage-backed securities at its policy meeting next month.
READ MORE

US jobless claims down 5,000, labour market tightens

The number of Americans filing for unemployment benefits fell last week, pointing to a tightening labor market that likely keeps the Federal Reserve on course to announce plans next month to start reducing its massive bond portfolio.

Labor market strength was also underscored by another report on Thursday showing US-based employers in July announced the fewest job cuts in eight months.

"The labor market remains tight as a drum even if it is not throwing off the sparks of higher wages and more inflation," said Chris Rupkey, chief economist at MUFG in New York. "The Fed can continue mopping up the stimulus provided to fight the financial crisis and recession."

Initial claims for state unemployment benefits decreased 5,000 to a seasonally adjusted 2,40,000 for the week ended July 29, the Labor Department said. Economists had forecast claims falling to 242,000.

Claims have now been below 300,000, a threshold associated with a healthy labour market, for 126 straight weeks. Thatis the longest such stretch since 1970, when the labour market was smaller. The labour market is near full employment, with the thejobless rate at 4.4 percent.

Economists believe that labour market tightness will encourage the Fed to announce a plan to start offloading its $4.2 trillion portfolios of Treasury bonds and mortgage-backed securities in September.
READ MORE

Gold retreats from one-month high ahead of Fed meeting

Gold prices retreated from a one-month high on Tuesday as equities gained ahead of a US Federal Reserve meeting that is expected to provide more clues about monetary policy.

The market is not expecting an interest rate increase at the Fed's two-day meeting starting on Tuesday but it is looking for hints on the timing and extent of future moves.

Spot gold was 0.2 per cent lower at $1,252.59 an ounce by 1326 GMT, not far from the previous session's peak of $1,258.79, its highest since June 23.

US gold futures fell 0.2 per cent to $1,252.

"The market is looking for clarity on the Fed's tightening cycle and when they are going to start with the tapering (of monetary stimulus)," said ETF Securities analyst Martin Arnold.

Taking the shine off gold slightly, investors climbed into European equities after a string of solid corporate updates. The US dollar hovered near a 13-month low against a basket of currencies on Tuesday, with traders not expecting the Fed meeting to alter the currency's recent weakness.

Markets give a less than 50 per cent probability of a US interest rate increase before the end of the year, according to CME's Fedwatch tool.

Also supporting gold were hurdles standing in the way of US President Donald Trump's economic stimulus and tax reform agenda.
READ MORE

Wall Street records fresh highs on Yellen's rate hike views at testimony

US stocks opened higher on Wednesday after Federal Reserve Chair Janet Yellen said interest rates hikes would be gradual and will not have to rise much further to reach neutral rate.

Yellen, in a prepared testimony to be delivered to Congress at 10 a.m. ET (1400 GMT), said the economy is healthy enough to absorb further gradual rate increases and the slow wind down of the Federal Reserve's massive bond portfolio.

The testimony depicted an economy that, while growing slowly, continued to add jobs, benefited from steady household consumption and a recent jump in business investment.

Investors and some Fed officials, concerned with the recent dip in inflation, have been wanting to see a surer progress toward the central bank's goal of 2 percent inflation.

Yellen ascribed the inflation drop to "a few unusual reductions in certain categories of prices" and said it would eventually drop out of the calculation.

"I'm not very surprised by Yellen's comments. She's been pretty steadfast that we're raising rates... The market is liking the fact that she's seeing economic growth," said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago.

"What the Fed's doing and she's doing is continuing the case for raising rates."

The U.S central bank will also issue its Beige Book at 2 p.m. ET, a compendium of anecdotes on the health of the economy. The Fed's next policy meeting is on July 25-26.

At 9:38 a.m. ET, the Dow Jones Industrial Average was up 133.61 points, or 0.62 percent, at 21,542.68, the S&P 500 was up 16.18 points, or 0.66 percent, at 2,441.71.
READ MORE

Fed raises rates by 25 bps: What it means for inflation and labour market

The Federal Reserve has raised the interest rates at which banks borrow by 25 basis points to 1.12 per cent on Wednesday for the second time in three months, brushing off a recent run of mixed economic data. It forecasted one more hike this year.
The Fed has now raised rates four times as part of a normalisation of monetary policy that began in December 2015. The central bank had pushed rates to near zero in response to the financial crisis.

What reasons did the Federal Reserve cite?

1. The US 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.

2. 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.

3. It expects to begin the normalisation 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.

What is the initial cap?

The initial cap for the reduction of the Fed's Treasuries holdings would be set at $6 billion per month, increasing by $6 billion increments every three months over a 12-month period until it reached $30 billion per month.

For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, rising by $4 billion at quarterly intervals over a year until it reached $20 billion per month.
READ MORE

Federal Reserve to normalise balance sheet in a careful way: William Dudley

New York Federal Reserve President William Dudley said on Thursday the US central bank will normalise its balance sheet in a "very careful way", while leaving "sufficient" excess reserves in the financial system.

Dudley, in a speech in Mumbai, also told the audience not to expect any "dramatic change" in monetary policy in the United States.

The comments largely hewed to his previous stance on the subject and came in answers to questions from the audience after Dudley delivered a speech calling trade protectionism a "dead end".
READ MORE

Sensex down over 150 points; Broader markets fall 1%

Latest News - Benchmark indices extended losses even as Asian markets rallied after the US Federal Reserve Chair Janet Yellen hinted at a likely rate hike in the forthcoming policy review.

At 1:19 pm, the S&P BSE Sensex was trading at 28,162, down 177 points, while the broader Nifty50 was ruling at 8,729, down 63 points.

In the broader market, BSE Midcap and BSE Smallcap lost 1.2% and 1.4%, respectively.

"Nifty is well placed above the 8,770 levels indicates strength and has a potential to test 8,840- 8,870 levels in coming trading sessions," said Nirmal Bang research in a technical note.

On Tuesday, foreign portfolio (Read More)