Stocks, dollar flat as investors brace for Fed statement

Stocks, dollar flat as investors brace for Fed statement”

However, in moderation, inflation simply represents a driving demand for goods and services.

She said the Fed would adjust its policymaking if it thought the causes of low inflation had become permanent.

The Federal Reserve on Wednesday announced details of its biggest post-recession policy shift since it first raised interest rates at the end of 2015. Driving the nation's monetary policy is one of its core missions.

Some of this overbalancing towards lower rates has been correcting slightly of late.

We'll know more tomorrow afternoon, when the Fed concludes its meeting.

Rand Merchant Bank currency strategist John Cairns tracked the underlying weakness in the local currency to increased odds of an interest rate increase in the USA in December. The key takeaway from the Import-Export Price Index report for August is that it will keep the possibility of a December rate hike on the table. Kellogg fell $1.15, or 1.7 percent, to $64.72, while Campbell Soup lost 81 cents, or 1.7 percent, to $46.51.

It was thought that 2017 would be the break-out year for rising prices.

PNC shares touched a record $133.69 before closing at $133, up 1.3 percent.

Fed officials cautioned that they do expect inflation to be higher than normal - at least for a little while - following the hurricanes that have devastated Texas, Florida and now Puerto Rico.

The Fed statement also sent the dollar higher against other currencies. The Fed's preferred measure of inflation has touched the 2 percent target once or twice since the 2008 collapse, but that's it. The economy continues to grow at a moderate, yet stable pace.

"I think that they will still on average lean toward hiking in December", he told AFP, noting there are a "sufficient number" of officials who believe low inflation is due to temporary factors.

"She wants to communicate as little new information as possible", said Wright, a former New York Fed economist, making the point that the FOMC will see three more months of data before its meeting in December. In reality, their internal discussions are a matter of when, not if, the next hike will be.

Banks and investors have benefited from having access to the Fed's expansive bond inventory for specific issues that can otherwise be hard to come by, but the Fed will soon have fewer bonds to lend. It is widely expected from the Federal Reserve's sixth meet of this year that it may announce paring its $4.2 trillion balance sheet, with the reductions likely to start this year. The impact should be gradually absorbed. Its size reflects bond purchases the Fed made after the crisis struck to try to ease long-term borrowing rates, encourage spending and energize an anemic economy. Latest US economic data allows the Fed a wait-and-see stance for stronger inflationary signals to unfold in the months ahead.

While the Fed is not expected to raise interest rates, remarks from the Fed and its boss Janet Yellen will be pored over for clues about future moves - with talk of another rise - and plans to wind down the vast bond-buying stimulus put in place during the financial crisis. The Fed's disconnect with the financial markets is not unusual. She called this year's inflation undershoot a "mystery".

The market is pricing in a 60 percent possibility of one rate hike in the U.S. this year.

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