Global stocks slip with tech, energy; dollar hits two-week highs

Gladys Abbott
June 19, 2017

The relatively firm Federal Reserve statement from Wednesday and an unexpected 5-3 Bank of England vote to hold interest rates at 0.25% had some impact in shifting expectations surrounding global central bank policies with a slightly more hawkish slant than had been priced in.

"As well, yesterday's FOMC (Federal Open Market Committee) meeting was less dovish than expected as the Fed kept its policy forecasts unchanged despite clear deceleration in inflation and a couple of bad data points yesterday".

This week brought additional evidence of low inflation and the recent softening has garnered the attention of the Fed, who noted in their statement that they are "monitoring inflation developments closely".

The Fed's leaders say they expect the world's largest economy to grow at a 2.2 percent annual rate this year, and expand a bit more slowly in 2018 and 2019. According to the Commerce Department, retail sales fell 0.3 percent in May, which was the first decline since February and biggest drop in 16 months since January 2016.

Yellen once again said the path of interest rates "is not a preset course", but the Fed's quarterly projections show that it still anticipates making a third rate increase this year, with the median federal funds rate ending this year at 1.4 percent.

The Fed said that while inflation has been low, it is expected to soon hit the 2 percent target.

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Shares fell in Asia on Thursday after the U.S. Federal Reserve raised interest rates, as expected.

"But shrinking balance sheet would boost the dollar in the long run", the trader said, noting the Fed's plan to reduce its portfolio would "inevitably" pile pressure on the Chinese yuan. While inflation has moderated in recent months, the Fed seems to be attributing this mostly to one-off factors.

Cashin spoke one day after Fed policymakers approved a 0.25 percentage point hike, the second increase of 2017 and the highest in nine years. It is also cited that U.S. economic growth and job market strength as reasons for raising its standard interest rate. Stock and bond prices weakened after the Fed's moves as some investors anxious that the actions would throttle back economic growth.

The exchange rates at MB Bank dropped from VNĐ22,750 to a dollar on Wednesday to VNĐ22,720 this morning. Bob Frick, corporate economist at Navy Federal Credit Union, describes this hike as "another step toward normalizing short-term interest rates and to signal that the economy is doing fine".

"I think our dollar is getting too strong, and partially that's my fault because people have confidence in me", Trump told The Wall Street Journal.

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