Wall Street opens slightly higher ahead of US Fed Reserve meet

Cornelia Mascio
Settembre 21, 2017

While risks are tilted to the downside, we still expect the median projection to continue to show a third rate hike this year, 3 hikes in 2018 and a longer-run funds rate at 3%.

This balance sheet unwinding is going to take place over a number of years so from that point of view, it shouldn't be disruptive to financial markets, he added.

Oil prices gained about 2 percent despite a rise in USA crude inventories.

Markets are expecting Janet Yellen and the central bank to announce that it will start to reduce a $4.5tn balance sheet which has been inflated by the government bond buying scheme or quantitative easing program, used by the central bank to stimulate the economy after the 2008 financial crisis.

Stocks are inching mostly lower on Wall Street after the Federal Reserve said it would start reducing its huge bond portfolio next month and was still on track to raise interest rates later this year. She also predicted the USA economy would suffer a notable degree of short-term damage from the impact of Hurricanes Irma, Harvey and Maria. "It's a highly levered global economy and currencies and the dollar and other related assets like gold will move substantially if the Fed overstates its case", Gross said Wednesday.

The Dow Jones Industrial Average .DJI rose 41.79 points, or 0.19 percent to end at 22,412.59, its seventh straight record close.

After months of making its future intentions clear, the Fed is widely expected to begin the reversal of an nearly nine-year quantitative easing program. The Fed now sees PCE at 1.9% at the end of 2018, down from a previous forecast of 2%.

Fed officials said they see 2017 growth at 2.4%, versus the 2.2% seen in at the June meeting.

Fed fund rate futures are pricing in about 65 per cent chance of a rate hike by December, the highest level since March, and around 50 per cent before the Fed meeting. The 2-year Treasury note's yield TMUBMUSD02Y, -1.15% was down by 1.6 basis point to 1.385%, versus 1.401%, while the 30-year bond yield TMUBMUSD30Y, -0.15% was virtually unchanged at 2.807%. The above-described gradual balance sheet adjustment by the Fed is slow, tiny per month and overall rather modest in comparison to the size of the U.S. bond market.

US crude rose 1.78 percent to $50.36 per barrel and Brent was last at $55.85, up 1.73 percent on the day.

The euro slid 0.8 per cent to US$1.1894, its lowest in four sessions, while the greenback gained 0.5 per cent to 112.17 yen after touching a two-month high at 112.51 yen, Reuters data showed.

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