Fed prepares to unwind $4.2 trillion in bond holdings

But Yellen says she hasn’t spoken since with Trump.

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In her subsequent press conference, Fed Chair Janet Yellen said the process of winding down the balance sheet will be gradual and predictable.

In the bond market, treasuries have pulled back near the unchanged line after moving slightly higher earlier in the session.

The Fed views a modest level of inflation as helping to propel consumer spending and business investment.

“Job gains have remained solid in recent months, and the unemployment rate has stayed low”, the Fed said in a statement.

“To me, that is profound to hear from a Fed chair”, she told “Closing Bell”.

Most officials in their quarterly forecasts still expect to see a third increase in the federal funds rate this year, which economists expect will come in December. Its predominantly consumption driven economy has struggled to track the export boom seen in neighboring countries and its inflation is seen trending to the lower end of the central bank’s 3-5 percent target. Lien cited softer wage growth, employment and spending since the central bank’s last policy meeting, adding that there was “very little to be excited about” regarding the US economic outlook.

Laggards included Hero MotoCorp down 2.5 percent, Tata Motors fell 1.8 percent, Sun Pharma dropped 2 percent while Hindustan Unilever lost 1.6 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.

On top of that, the devastation caused by recent severe hurricanes could make it hard for Fed policymakers to get a solid read on the economy in the coming weeks as they decide whether to enact another small hike in a key interest rate.

Some Fed officials have warned against raising interest rates until inflation – which reflects the prices of everything from meat and cheese to houses and cars – meets the goal of 2% that they consider healthy for the economy. But given that the chances of a December move are still 47%, the greenback will likely need a more hawkish assessment for the path of rates, i.e.an expectation of more rate hikes in 2018.

“For the average person, it means mortgage interest rates might go up”, Gagnon says.

Fed officials’ median forecast for their interest rate target still has the overnight target rate at 1.4% for this year. They now expect there will likely be two hikes, down from three.

Stocks continue to turn in a lackluster performance in mid-day trading on Wednesday ahead of this afternoon’s monetary policy announcement by the Federal Reserve.

“The Fed coming in and letting these assets mature”.

Oil prices flirted with multi-month highs, despite a rise in US crude inventories, after the Iraqi oil minister said OPEC and its partners were considering extending or deepening output cuts, ahead of the planned meeting between OPEC and non-OPEC nations on Friday.

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The Bank of Japan is expected to reassure markets on Thursday that it will lag well behind its USA counterpart in scaling back its massive stimulus, as an improving economy has yet to boost inflation anywhere near its elusive 2 per cent target. For comparison, the economy grew at only a 1.2 percent rate in the first quarter of the year.

Business Insider  Andy Kiersz data from FOMC