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| Janet Yellen's press conference after US Federal Reserve raises interest rates - business live | Janet Yellen's press conference after US Federal Reserve raises interest rates - business live |
| (35 minutes later) | |
| 9.08pm BST | |
| 21:08 | |
| Dow closes at record high but Nasdaq dips | |
| DING DING goes the closing bell on Wall Street. | |
| And the Dow Jones industrial average has finished at a record high, up around 0.2% | |
| But the technology-focused Nasdaq index has dropped by 0.6%. | |
| 8.55pm BST | |
| 20:55 | |
| Capital Economists have provided a brisk summary of the Fed’s decisions today: | |
| As widely expected, the Fed raise its policy rate target by an additional 25bp today, to between 1.00% and 1.25% and, despite the recent weakness of core inflation, Fed officials still expect to raise that rate once more in the second half of this year. | |
| The Fed also laid out plans for shrinking its balance sheet, with the initial run-off even smaller than we had previously expected, although it offered no specifics on the timing of when that normalisation would begin other than “this year”. | |
| 8.44pm BST | 8.44pm BST |
| 20:44 | 20:44 |
| Wall Street isn’t too happy with Janet Yellen’s comments. | Wall Street isn’t too happy with Janet Yellen’s comments. |
| The Nasdaq index has dropped by 1% after the Fed chair downplayed recent weak inflation data and signalled that US interest rates will continue to rise over the next couple of years. | The Nasdaq index has dropped by 1% after the Fed chair downplayed recent weak inflation data and signalled that US interest rates will continue to rise over the next couple of years. |
| The S&P 500 is down 0.25%, while the Dow Jones industrial average is flat. | The S&P 500 is down 0.25%, while the Dow Jones industrial average is flat. |
| 8.36pm BST | 8.36pm BST |
| 20:36 | 20:36 |
| Finally, Yellen gets a question about apprenticeships, and Donald Trump’s new push to get more Americans to develop their work skills on the job (a specialist subject for the President, of course). | Finally, Yellen gets a question about apprenticeships, and Donald Trump’s new push to get more Americans to develop their work skills on the job (a specialist subject for the President, of course). |
| Yellen agrees that it’s an important area. | Yellen agrees that it’s an important area. |
| It is hard for firms to find workers with appropriate skills right now, as the labor market is so tight. | It is hard for firms to find workers with appropriate skills right now, as the labor market is so tight. |
| It’s a particular problem for smaller businesses, she explains, as they have less latitude to retrain workers. | It’s a particular problem for smaller businesses, she explains, as they have less latitude to retrain workers. |
| Really interesting from Yellen on labor markets: large employers are upgrading employee skills bc of low labor availability, small can't. | Really interesting from Yellen on labor markets: large employers are upgrading employee skills bc of low labor availability, small can't. |
| Yellen on apprenticeships: labor market is tight, larger firms spending more on training... and this is an "important area." | Yellen on apprenticeships: labor market is tight, larger firms spending more on training... and this is an "important area." |
| That’s the end of the press conference | That’s the end of the press conference |
| 8.29pm BST | 8.29pm BST |
| 20:29 | 20:29 |
| Yellen: QE works! | Yellen: QE works! |
| Q: Now you are getting ready to reduce your balance sheet, what have you learned about QE and whether it works? | Q: Now you are getting ready to reduce your balance sheet, what have you learned about QE and whether it works? |
| Great question, says Yellen, who explains how staff at the Fed, and outside, have done a great deal of work evaluating QE. | Great question, says Yellen, who explains how staff at the Fed, and outside, have done a great deal of work evaluating QE. |
| I think we have learned that it works, it’s a valuable part of the toolkit. | I think we have learned that it works, it’s a valuable part of the toolkit. |
| How has it worked, exactly? Yellen says QE (buying huge amounts of bonds with new money) succeeded in putting downward pressure on longer-term interest rates. | How has it worked, exactly? Yellen says QE (buying huge amounts of bonds with new money) succeeded in putting downward pressure on longer-term interest rates. |
| And it hasn’t caused the “runaway inflation” which some critics feared. “Quite the reverse” says Yellen, dryly. | And it hasn’t caused the “runaway inflation” which some critics feared. “Quite the reverse” says Yellen, dryly. |
| So in future, if the Fed hit an episode of extreme economic weakness its primary weapon would be interest rates. But if it reached the point where it couldn’t cut again (the zero lower bound), QE could be deployed. | So in future, if the Fed hit an episode of extreme economic weakness its primary weapon would be interest rates. But if it reached the point where it couldn’t cut again (the zero lower bound), QE could be deployed. |
| 8.19pm BST | 8.19pm BST |
| 20:19 | 20:19 |
| Q: The president has credited you with being a ‘low interest’ person. Do you agree? | Q: The president has credited you with being a ‘low interest’ person. Do you agree? |
| Yellen says she ‘strongly supported’ the Fed’s policy of keeping interest rates at record lows after the financial crisis -- so i guess she’s accepting the accolade, despite having just raised rates! | Yellen says she ‘strongly supported’ the Fed’s policy of keeping interest rates at record lows after the financial crisis -- so i guess she’s accepting the accolade, despite having just raised rates! |
| 8.11pm BST | 8.11pm BST |
| 20:11 | 20:11 |
| Q: What do you say to the group of economists who are calling for the Fed’s inflation target to be raised? | Q: What do you say to the group of economists who are calling for the Fed’s inflation target to be raised? |
| [This group, which includes Nobel laureate Joe Stiglitz, warned that the Fed could trigger a recession if it kept raising rates] | [This group, which includes Nobel laureate Joe Stiglitz, warned that the Fed could trigger a recession if it kept raising rates] |
| Yellen plays a straight bat (unlike the England cricket team today, alas), saying it’s a very important issue. | Yellen plays a straight bat (unlike the England cricket team today, alas), saying it’s a very important issue. |
| The Fed is open to a wide range of views, and might reconsider its target sometime in the future....ants to take in a wide range of views. | The Fed is open to a wide range of views, and might reconsider its target sometime in the future....ants to take in a wide range of views. |
| Yellen: Reconsideration of 2% infl target is "one of the most impt questions facing monetary policy around the world" | Yellen: Reconsideration of 2% infl target is "one of the most impt questions facing monetary policy around the world" |
| Yellen on raising the inflation target: Fed will reconsider at some future time, want to take in wide range of views and research. | Yellen on raising the inflation target: Fed will reconsider at some future time, want to take in wide range of views and research. |
| Updated | Updated |
| at 8.12pm BST | at 8.12pm BST |
| 8.07pm BST | 8.07pm BST |
| 20:07 | 20:07 |
| Fidelity’s chief economist, Anna Stupnytska, is surprised that Yellen is sounding more cautious - especially about inflation and wage growth. | Fidelity’s chief economist, Anna Stupnytska, is surprised that Yellen is sounding more cautious - especially about inflation and wage growth. |
| #Fed completely ignoring low #inflation and wage growth. Hawkish. Quite incredible! #Yellen #USD | #Fed completely ignoring low #inflation and wage growth. Hawkish. Quite incredible! #Yellen #USD |
| 8.01pm BST | 8.01pm BST |
| 20:01 | 20:01 |
| Back to inflation... | Back to inflation... |
| Q: Is it possible that globalisation, and falling central bank credibility, mean we’ve entered an era of low inflation where it will be very hard to get wages and prices rising again? | Q: Is it possible that globalisation, and falling central bank credibility, mean we’ve entered an era of low inflation where it will be very hard to get wages and prices rising again? |
| Yellen doesn’t think that the Federal Reserve’s credibility has been impaired (but what else would a Fed chair say?!). | Yellen doesn’t think that the Federal Reserve’s credibility has been impaired (but what else would a Fed chair say?!). |
| But it’s “certainly possible” that structural factors are partly to blame, she adds. | But it’s “certainly possible” that structural factors are partly to blame, she adds. |
| 7.59pm BST | 7.59pm BST |
| 19:59 | 19:59 |
| 7.57pm BST | 7.57pm BST |
| 19:57 | 19:57 |
| Yellen says she’s not seen much evidence that Donald Trump’s proposed tax and spending plans have changed consumer or business spending. | Yellen says she’s not seen much evidence that Donald Trump’s proposed tax and spending plans have changed consumer or business spending. |
| 7.56pm BST | 7.56pm BST |
| 19:56 | 19:56 |
| Q: Is the Fed worried about the recent run of weak inflation futures? | Q: Is the Fed worried about the recent run of weak inflation futures? |
| Yellen doesn’t sound too worried, saying that inflation can be “noisy” and affected by idiosyncratic factors. | Yellen doesn’t sound too worried, saying that inflation can be “noisy” and affected by idiosyncratic factors. |
| She cites cuts to cell phone contract prices, and some over-the-counter medicines. | She cites cuts to cell phone contract prices, and some over-the-counter medicines. |
| 7.54pm BST | 7.54pm BST |
| 19:54 | 19:54 |
| Yellen: No talks with Trump about my future | Yellen: No talks with Trump about my future |
| Onto questions, and the press pack quickly home in on Yellen’s future. | Onto questions, and the press pack quickly home in on Yellen’s future. |
| Q: Have you spoken to the president about the possibility of serving a second term, and would you be interested? Yellen says she is fully committed to serving her full first term, but she’s not had any discussions with president Trump about a second term. | Q: Have you spoken to the president about the possibility of serving a second term, and would you be interested? Yellen says she is fully committed to serving her full first term, but she’s not had any discussions with president Trump about a second term. |
| She declines to say whether she’d like to say on when her first term expires (in February 2018). | She declines to say whether she’d like to say on when her first term expires (in February 2018). |
| [Background: Trump dropped loud hints last year that he would replace Yellen] | [Background: Trump dropped loud hints last year that he would replace Yellen] |
| Q: Are you disappointed that Trump’s administration haven’t produced any nominees for the Fed’s board of governors? | Q: Are you disappointed that Trump’s administration haven’t produced any nominees for the Fed’s board of governors? |
| The White House is working hard to find nominees for open slots, Yellen replies. She “very much hopes” there will be nominations in the not too distant future. | The White House is working hard to find nominees for open slots, Yellen replies. She “very much hopes” there will be nominations in the not too distant future. |
| Updated | Updated |
| at 7.58pm BST | at 7.58pm BST |
| 7.45pm BST | 7.45pm BST |
| 19:45 | 19:45 |
| Yellen is now outlining the Fed’s plan to start reducing its balance sheet later this year [details here]. | Yellen is now outlining the Fed’s plan to start reducing its balance sheet later this year [details here]. |
| She confirms that the Fed will take a cautious approach, initially with a $6bn monthly cap on sales of Treasury bonds and $4bn on mortgage-backed securities. | She confirms that the Fed will take a cautious approach, initially with a $6bn monthly cap on sales of Treasury bonds and $4bn on mortgage-backed securities. |
| This cap, which is expected to rise every quarter, will avoid any “market strains” as the Fed sells some of the assets bought during the financial crisis to stimulate the economy. | This cap, which is expected to rise every quarter, will avoid any “market strains” as the Fed sells some of the assets bought during the financial crisis to stimulate the economy. |
| Yellen also cautions that there is no rush to take decisions about the long-run framework of monetary policy. Big decisions, like the ideal future composition of the Fed’s balance sheet, needn’t be taken for “quite some time”. | Yellen also cautions that there is no rush to take decisions about the long-run framework of monetary policy. Big decisions, like the ideal future composition of the Fed’s balance sheet, needn’t be taken for “quite some time”. |
| 7.41pm BST | 7.41pm BST |
| 19:41 | 19:41 |
| Janet Yellen also acknowledges the shooting in Virginia earlier today, where several people including Steve Scalise, Republican House majority whip, were shot. | Janet Yellen also acknowledges the shooting in Virginia earlier today, where several people including Steve Scalise, Republican House majority whip, were shot. |
| Our thoughts are with those who were injured this morning, the Fed chair says. | Our thoughts are with those who were injured this morning, the Fed chair says. |
| Fed Chair Yellen: "Our thoughts are with those who were injured this morning"Live: https://t.co/WsY9lk7UDP pic.twitter.com/hEBVjoAJ9h | Fed Chair Yellen: "Our thoughts are with those who were injured this morning"Live: https://t.co/WsY9lk7UDP pic.twitter.com/hEBVjoAJ9h |
| 7.39pm BST | 7.39pm BST |
| 19:39 | 19:39 |
| Fed chair Janet Yellen explains that today’s interest hike reflects the “progress” in the economy, which appears to have “rebounded” after slowing in the first three months of 2017. | Fed chair Janet Yellen explains that today’s interest hike reflects the “progress” in the economy, which appears to have “rebounded” after slowing in the first three months of 2017. |
| A pick-up in global growth is helping US exports, she says. | A pick-up in global growth is helping US exports, she says. |
| Yellen adds that the job market will probably strengthen further, but cautions that it is near its “maximum sustainable level”. | Yellen adds that the job market will probably strengthen further, but cautions that it is near its “maximum sustainable level”. |
| On inflation, she credits one-off factors for the recent slowdown in inflation. | On inflation, she credits one-off factors for the recent slowdown in inflation. |
| And the bottom line - the Fed continues to expect that gradual increases in borrowing costs will be needed to keep inflation close to target, while sustaining the economic expansion. | And the bottom line - the Fed continues to expect that gradual increases in borrowing costs will be needed to keep inflation close to target, while sustaining the economic expansion. |
| But, rates are still likely to be lower than in previous economic cycles, she adds. | But, rates are still likely to be lower than in previous economic cycles, she adds. |
| 7.34pm BST | 7.34pm BST |
| 19:34 | 19:34 |
| Janet Yellen's press conference begins | Janet Yellen's press conference begins |
| Over in Washington, Federal Reserve chair Janet Yellen is holding a press conference to discuss today’s decisions. | Over in Washington, Federal Reserve chair Janet Yellen is holding a press conference to discuss today’s decisions. |
| You can watch it live here. | You can watch it live here. |
| Yellen is explaining that the Fed “continues to expect that the economy will expand at a moderate pace”, as conditions continue to improve in the labour market. | Yellen is explaining that the Fed “continues to expect that the economy will expand at a moderate pace”, as conditions continue to improve in the labour market. |
| 7.26pm BST | 7.26pm BST |
| 19:26 | 19:26 |
| The most important news tonight is the new guidelines on Fed balance sheet reduction. | The most important news tonight is the new guidelines on Fed balance sheet reduction. |
| So says Tom Stevenson, investment director for personal investing at Fidelity International. | So says Tom Stevenson, investment director for personal investing at Fidelity International. |
| Stevenson explains: | Stevenson explains: |
| There was never much doubt that the Federal Reserve would raise interest rates by a further 0.25% at today’s meeting to between 1% and 1.25%. ... | There was never much doubt that the Federal Reserve would raise interest rates by a further 0.25% at today’s meeting to between 1% and 1.25%. ... |
| More important was what the US central had to say about its plans to rein in its bloated balance sheet, which has ballooned to $4.5trn since the financial crisis as the Fed has bought government and mortgage-backed bonds to underpin the American economy. The Fed said today that it would decrease reinvestment of maturing bonds at a steadily increasing rate until after a year it is holding back $30bn a month on Government bonds and $20bn on mortgage backed securities. | More important was what the US central had to say about its plans to rein in its bloated balance sheet, which has ballooned to $4.5trn since the financial crisis as the Fed has bought government and mortgage-backed bonds to underpin the American economy. The Fed said today that it would decrease reinvestment of maturing bonds at a steadily increasing rate until after a year it is holding back $30bn a month on Government bonds and $20bn on mortgage backed securities. |
| 7.23pm BST | 7.23pm BST |
| 19:23 | 19:23 |
| The Fed has taken another step towards “normalisation”, says Nancy Curtin, chief investment officer at Close Brothers Asset Management commented. | The Fed has taken another step towards “normalisation”, says Nancy Curtin, chief investment officer at Close Brothers Asset Management commented. |
| “Recent economic indicators have not been weak enough to prevent Yellen pulling the lever on the third rate hike in seven months. | “Recent economic indicators have not been weak enough to prevent Yellen pulling the lever on the third rate hike in seven months. |
| Yes, inflation remains elusive, and wage growth relatively weak, but the data does not suggest growth has slowed enough to suggest a change in tack. | Yes, inflation remains elusive, and wage growth relatively weak, but the data does not suggest growth has slowed enough to suggest a change in tack. |
| The decision to raise rates doesn’t signal the beginning of ‘tight’ monetary policy from the Federal Reserve, but it does mark another step towards normalisation, as well as confidence in the long-term recovery of the economy.” | The decision to raise rates doesn’t signal the beginning of ‘tight’ monetary policy from the Federal Reserve, but it does mark another step towards normalisation, as well as confidence in the long-term recovery of the economy.” |