Fed raises interest rate, sees possible acceleration in hikes - Canadanewsmedia
Connect with us

Business

Fed raises interest rate, sees possible acceleration in hikes

Published

on


Federal Reserve officials raised interest rates for the second time this year and upgraded their forecast to four total increases in 2018, as unemployment falls and inflation overshoots their target faster than previously projected.

The so-called “dot plot” released Wednesday showed eight Fed policy makers expected four or more quarter-point rate increases for the full year, compared with seven officials during the previous forecast round in March. The number viewing three or fewer hikes as appropriate fell to seven from eight. The median estimate implied three increases in 2019 to put the rate above the level where officials see policy neither stimulating nor restraining the economy.

The Federal Open Market Committee indicated that even though it’s stepping up the pace of interest-rate hikes, economic growth should continue apace. “The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee’s symmetric 2 per cent objective over the medium term,” according to its statement following a meeting in Washington.

The statement omitted previous language saying that the main rate would remain “for some time” below longer-run levels. Other changes included referring to “further gradual increases” instead of “adjustments.” Officials also said that “indicators of longer-term inflation expectations are little changed.” Previously, the statement made separate references to survey-based and market-based measures of such expectations.

The S&P 500 Index of U.S. stocks fell after the Fed decision, while benchmark 10-year yields were up to 2.98 per cent from Tuesday’s 2.96 per cent. The Bloomberg dollar spot index, which tracks the performance of a basket of 10 global currencies against the greenback, climbed 0.1 per cent on the day.

While the course of interest-rate hikes remains gradual, the slightly more aggressive pace shows officials see more urgency to tighten policy, as unemployment already fell in May to the level they had forecast for year-end. U.S. growth is also getting a boost from US$1.5 trillion in tax cuts and a US$300 billion increase in federal spending, with inflation at the central bank’s 2 percent target for two months.

The statement retained language in place since late 2015 saying “policy remains accommodative.” Fed officials repeated their assessment that “risks to the economic outlook appear roughly balanced.”

‘Solid Rate’

“Economic activity has been rising at a solid rate,” the FOMC said in its statement. “Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly.”

Wednesday’s decision — the sixth quarter-point increase in 18 months, raising the benchmark federal funds target rate to a range of 1.75 per cent to 2 per cent — was a unanimous 8-0.

Chairman Jerome Powell is scheduled to hold a press conference at 2:30 p.m., his second since taking the helm from Janet Yellen in February. Powell has repeatedly played down the dot plot as a guide to future interest rates, though investors continue to focus on it.

Updating their quarterly forecasts, officials projected the policy rate at 3.1 per cent at the end of 2019, according to their median estimate — compared with 2.9 per cent seen in March — and 3.4 per cent in 2020, unchanged from the prior forecast.

Officials lowered their jobless-rate estimates after unemployment fell to 3.8 per cent as of May, matching April 2000 as the lowest reading since 1969. U.S. payrolls expanded by more than 1 million workers in the first five months of 2018, reaching the milestone faster than in the previous two years.

Fed policy makers now see U.S. unemployment at 3.6 per cent in the fourth quarter, followed by 3.5 per cent in 2019 and 2020, based on median projections. That compares with March’s forecasts for 3.8 per cent this year and 3.6 per cent in the following two years. Estimates of the long-run sustainable unemployment rate were unchanged at 4.5 per cent.

Inflation Forecasts

On inflation, policy makers forecast a slight overshoot of their target starting in 2018 at 2.1 per cent, and running through 2019 and 2020, compared with a 2020 overshoot in March’s projections. The Fed’s preferred price gauge — the Commerce Department’s personal consumption expenditures index — rose 2 per cent from a year earlier in March and April, after spending most of the past six years below it.

The core PCE index, which excludes food and energy and is seen by officials as a better gauge of underlying price pressures, is forecast to reach 2 per cent this year and 2.1 per cent in 2019 and 2020. The index rose 1.8 per cent in April from a year earlier.

U.S. central bankers again emphasized on Wednesday that the goal is “symmetric,” and they said in minutes of the May meeting that “a temporary period of inflation modestly above 2 per cent” would help anchor long-run inflation expectations around the target.

The median estimate for economic growth this year rose to 2.8 per cent from 2.7 per cent in March, with projections unchanged for 2.4 per cent in 2019 and 2 per cent in 2020. The committee’s forecast for the long-run sustainable growth rate of the economy held at 1.8 per cent, suggesting policy makers are skeptical of the effect of tax cuts on the economy’s capacity for growth.

IOER Action

Fed raised interest on excess reserves rate — known as IOER — by 20 basis points to 1.95 per cent, effective Thursday Action “is intended to foster trading in the federal funds market at rates well within the FOMC’s target range,” Fed said May minutes had flagged possibility of such a move as a “small technical adjustment” in implementing monetary policy.

Bloomberg.com

The hike from 1.75 per cent to 2 per cent reflects the economy’s resilience, the job market’s strength and inflation that’s finally nearing the Fed’s target level
The bank is aiming to woo more than 2.5 million new Canadian banking customers by 2023 with a focus on artificial intelligence, digital products and social media
Centerra Gold Inc.’s conflicts with political leaders in the Kyrgyz Republic continue to rear their head
Canada’s pot law could be signed by the Governor General this week

Let’s block ads! (Why?)



Source link

Continue Reading

Business

Pipeline protesters defy eviction order, say they'll meet with officials

Published

on

By


Kwitsel Tatel, left, speaks to media during a press conference at Camp Cloud near the entrance of the Kinder Morgan Trans Mountain pipeline facility in Burnaby, B.C., on Saturday July 21, 2018. THE CANADIAN PRESS/Ben Nelms

BEN NELMS/The Canadian Press

Protesters at an anti-pipeline camp in Burnaby, B.C., say they will meet with officials to discuss safety measures, but they will not comply with a city-issued evacuation order.

The City of Burnaby says there are safety concerns surrounding “Camp Cloud,” including a two-storey wooden watch house and a fire that protesters describe as sacred and ceremonial.

Protest organizer Kwitsel Tatel says the participants will not leave, nor will they extinguish their fire.

Story continues below advertisement

Tatel suggests the structures around the camp’s sacred fire could be modified, if only to refocus the attention away from the physical camp and back to the anti-pipeline protest.

She adds that snuffing out the fire would constitute a breaking of both B.C. Supreme Court and Coast Salish law.

The protesters say the city’s notice, which was issued on Wednesday and expired early Saturday, was written without adequate consideration of a recent court decision or consultation with camp residents.

Let’s block ads! (Why?)



Source link

Continue Reading

Business

2 Uncle Ben's rice varieties recalled in eastern Canada

Published

on

By


Mars Food Canada is voluntarily recalling select Uncle Ben's rice products, including its Fast & Fancy Broccoli and Cheddar, and Country Chicken flavoured rice, after learning about possible salmonella contamination in the seasoning pouches in both products. The recall only affects products sold in eastern Canada.

In a statement, the company said it is conducting the recalls "out of an abundance of caution."

"We are working with a limited number of impacted retailers in eastern Canada to have the product removed from store shelves," it said.

The company said while the majority of affected products have already retrieved, customers should check any packages of rice featuring any of the lot codes listed here. It says affected products should not be consumed.

The recall comes amid a flurry of food product recalls affecting Loblaws and Ritz products. The Canadian Food Inspection Agency said Saturday it is recalling Ritz bits sandwich crackers and No Name chicken nuggets for risk of salmonella contamination.

The breaded nuggets, offered at Maxi, Provigo, AXEP and Intermarché grocery stores in Quebec, were sold in boxes of 907 grams with the best before date "2019 MA 15."

The recalled Ritz crackers were sold in packs of 180 grams, 30 X 42 grams and 42 grams. The best before dates are November 2018 to March 2019. 

Let’s block ads! (Why?)



Source link

Continue Reading

Business

Fiat Chrysler chooses Jeep exec Mike Manley to replace ailing CEO Marchionne

Published

on

By


Fiat Chrysler Automobile announced Saturday that CEO Sergio Marchionne's health had suddenly deteriorated following surgery and that its board of directors had chosen Jeep executive Mike Manley to replace him.

Marchionne, a 66-year-old Italian-Canadian, joined Fiat in 2004 and led the Turin-based company's merger with bankrupt U.S. carmaker Chrysler. Manley, 54, had been heading the Jeep brand since June 2009 and the Ram brand from October 2015.

The announcement, at the end of an urgently convened board meeting, marked the end of the Marchionne era, which included the turnaround of failing Fiat, the takeover of bankrupt U.S. automaker Chrysler and the spinoffs of the heavy machinery and truck maker CNH and supercar maker Ferrari.

Fiat Chrysler said in a statement that due to his deteriorating health Marchionne "will be unable to return to work."

Marchionne, 66, had already announced he would step down in early 2019, so the board's decision, to be confirmed at an upcoming shareholders' meeting, will "accelerate" the CEO transition process, the statement said.

Chrysler CEO Sergio Marchionne, left, is seen with Jeep brand President and CEO Mike Manley at the Jefferson North Assembly Plant, in Detroit. (Carlos Osorio/Associated Press)

The British-born Manley had been one of Marchionne's closest collaborators at the group, and in a previous role had been responsible for product planning and all sales activities outside of North America.

Marchionne was reported to have had surgery for a shoulder problem about three weeks ago in Switzerland.

Fiat is considered a close-knit family, and FCA chairman John Elkann said he was "profoundly saddened to learn of Sergio's state of health. It was a situation that was unthinkable until a few hours ago, and one that leaves us all with a sense of injustice."

Elkann didn't give details of Marchionne's health problems, adding that his "first thoughts go to Sergio and his family." He asked everyone to respect Marchionne's "privacy and that of all those who are dear to him."

Elkann is a grandson of the late Gianni Agnelli, the longtime Fiat dynasty chieftain.

The boards of Ferrari and CNH Industrial, which makes heavy machinery and trucks, were called urgently to meet on Saturday in Turin, Fiat's headquarters.

Ferrari announced that Louis Camilleri, an Egyptian-board Maltese and longtime executive at Philip Morris International, the tobacco company, was chosen to replace Marchionne as CEO of the sports car maker. 

A Fiat Chrysler sign is seen outside the Chrysler World Headquarters in Auburn Hills, Mich., in this file photo. (Carlos Osorio/Associated Press)

Known for sleeping only briefly each night, Marchionne, who is also a lawyer, was holding multiple leadership roles in the companies, notably as CEO of FCA — Fiat Chrysler Automobiles, as well as CEO and chairman of Ferrrari.

In early June, Marchionne made his last major presentation as CEO of Fiat Chrysler. On that occasion he announced there would be a major investment thrust to make more electrified cars, although traditional engines will continue to dominate production. He unveiled FCA's plans through 2022.

Brands that have been driving the company's revenues include Jeep SUVs, Ram trucks and the premium brands, Maserati and Alfa Romeo. Those brands were expected to account for 80 per cent of revenues by 2022, compared to 65 per cent currently.

The passenger-car brands of Fiat and Chrysler have been less profitable.

At the June appearance, Marchionne also predicted Fiat was about to eliminate its debt.

Next corporate results are set to be released on July 25.

Let’s block ads! (Why?)



Source link

Continue Reading

Trending

Copyright © 2018 Canada News Media

%d bloggers like this: