Markets

Art Cashin: US Economy Isn't as Strong as Fed Thinks

Art Cashin: US Economy Isn't as Strong as Fed Thinks

"The U.S.is good. More important, we see the worldwide markets finally beginning a six- to eight-year turn", said Christine Armstrong, executive director at Morgan Stanley in Boston.

The U.S. Federal Reserve has raised the target range for the federal funds rate to 1 percent to 1.25 percent from 0.91 percent, citing labor market conditions and inflation. The BoE might underestimate the recent spike in prices, but if two or three MPC members see a need to follow the Fed by hiking rates the pound will appreciate sharply.

The vote in favor of the hike was unanimous.

Wall Street's top banks brought forward their expectations for when they think the Federal Reserve will begin reducing its $4.5 trillion bond portfolio to as early September, and see balance sheet reduction as more of a priority than another interest rate rise, a Reuters poll showed.

In the wake of the financial crisis, the central bank added Treasury securities and mortgage-backed securities to its balance sheet. The prospect of higher interest rates will increase the opportunity cost of holding gold and had some negative impact on market confidence. She noted that-among other things-stabilization in the labor force participation rate is signaling a stronger jobs market.

The most interesting thing about this meeting is that it comes at a time when the Dollars has endured a less than stellar jobs report (some decried it as disastrous, ) and with inflation possibly slowing as forecasts for last month's CPI see it dipping from 2.2% back to 2.0%.

The dollar nursed losses on Thursday, after weak United States inflation data left investors wondering if the Federal Reserve would be able to follow up its latest rate hike with another later this year.




The Federal Reserve raised interest rates for the third time since December, something investors had widely expected based on the Fed's recent statements.

Even though projections for inflation were lowered to 1.6% from 1.9% in 2017, the dot plot didn't change.

The Fed wants inflation to rise higher than that - to about 2 percent - because rising prices encourage us to spend now rather than wait.

MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.7 percent, led by resource shares.

Still, the Fed reiterated its federal funds rate forecast on Wednesday, saying it still expects its benchmark rate to reach 1.4 percent by the end of 2017.

The government reported yesterday that the Consumer Price Index, which is one measure of inflation, fell 0.1 percent in May from the month before.

On Wednesday, the dollar index barely budged as slightly firmer moves against the euro and yen were offset by losses against the commodity bloc of currencies, such as the Australian and Canadian dollars. Benchmark U.S. crude fell another 15 cents to $44.58 a barrel in electronic trading on the New York Mercantile Exchange. United States crude fell 3.7 per cent to settle at $44.73 per barrel and Brent settled at $47.00, down 3.5 per cent. Spot gold fell 0.2 per cent to $1,263.03 an ounce.


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