The Latest: Yellen says Fed waiting to see Trump's program
Posted March 15
NEW YORK — The Latest on the Federal Reserve's monetary policy meeting (all times local):
Federal Reserve Chair Janet Yellen says Federal Reserve officials have not had a detailed discussion yet about the possible economic impacts of President Donald Trump's economic program.
She said the Fed's policy committee has not tried to "map out" what the central bank's response would be if Trump is successful in getting his ambitious program of tax cuts, increased infrastructure spending and deregulation through Congress.
But Yellen said that Fed officials believe they will have "plenty of time" to respond to whatever program makes it through Congress.
Federal Reserve Chair Janet Yellen says she had a "brief" meeting with President Donald Trump. But Yellen didn't reveal the content of her conversation with Trump, who was at times during the presidential campaign an intense critic of Yellen and the Fed.
The Fed chair told reporters at a Wednesday news conference that she had also met a "couple of times" with Treasury Secretary Steven Mnuchin. They discussed global economic developments and financial regulation.
"I'm getting to know him," Yellen set of Mnuchin. "I fully expect to have a strong relationship with Secretary Mnuchin."
Stock prices are rising and bond yields are falling as traders react to the Federal Reserve's plans to raise interest rates at a gradual pace this year.
High-dividend stocks like utilities and real estate companies did better than the rest of the market Wednesday. Financial stocks fell.
The dollar also moved lower against other currencies and gold prices rose, both signs that investors don't expect U.S. interest rates to rise quickly this year.
The yield on the two-year Treasury note, which is particularly sensitive to changes in Fed policy, dropped to 1.32 percent from 1.38 percent.
In stock trading, the Standard & Poor's 500 index rose 15 points, or 0.6 percent, to 2,380. It had been up through the day, and gains accelerated immediately after the Fed made its announcement.
Neel Kashkari, the president of the Minneapolis Fed, cast the lone dissenting vote against the Fed's decision to raise short-term rates Wednesday. By doing so, he was following in the footsteps of his predecessor, Narayana Kocherlakota, a prominent dissenter against rate hikes.
Kocherlakota was also well-known for a sharp shift in his views. During his six-year tenure as Minneapolis Fed president, he switched from a staunch opponent of the Fed's ultra-low interest rate policies to one of its most passionate supporters.
Kashkari, meanwhile, first entered the public spotlight when, at the Treasury Department, he ran the Troubled Asset Relief Program, or TARP, the 2008 Wall Street bailout. He later ran unsuccessfully for governor of California before his appointment to the Minneapolis Fed.
Federal Reserve policymakers expect to hike rates a total of three times this year, including the increase announced Wednesday. That's the same as their December forecast. But more Fed officials now support that view: Nine of 17 Fed policymakers support three hikes, up from six in December.
The Fed also forecast three hikes in 2018, the same as they projected three months earlier, and between three and four increases 2019.
Their mostly status quo outlook was also seen in their economic projections. Fed policymakers project modest growth of 2.1 percent this year and in 2018, slowing to 1.9 percent in 2019. The unemployment rate should fall to 4.5 percent at the end of this year and remain at that level through 2019, also unchanged.
The Federal Reserve will hike its key short-term rate, the third increase since December 2015 and a show of confidence in that the economy is stable. Steady hiring has brought down the unemployment rate to 4.7 percent, while the Fed's preferred measure of inflation has been moving closer to the central bank's preferred target of 2 percent.
By a 9 to 1 vote, Fed officials raised the federal funds rate 0.25 percentage points to a range of 0.75 to 1 percent. The Fed had cut during the 2008 financial crisis to a record low in order to help steady the economy and only gradually began to increase it at the end of 2015. Still, the Fed said in a statement that the federal funds rate — what banks charge each other for short-term loans — is low enough to encourage borrowing and investing that can bolster economic activity.
Stocks were slightly higher in cautious trading on Wall Street ahead of what investors expect will be another interest rate increase from the Federal Reserve.
The Standard & Poor's 500 index rose 5 points, or 0.2 percent, to 2,370 as of 10 a.m. Eastern time.
The Dow Jones industrial average gained 40 points, or 0.2 percent, to 20,877. The Nasdaq composite picked up 7 points, or 0.1 percent, to 5,863.
Bond prices rose. The yield on the 10-year Treasury note fell to 2.58 percent from 2.60 percent.
Because an interest rate increase is widely expected, investors will be listening carefully for what Fed Chair Janet Yellen indicates about the Fed's plans for future rate hikes.
Trading in stock markets is cautious and the dollar is slightly weaker as investors look ahead to an expected interest rate increase by the Federal Reserve.
Because the increase is widely expected, a key point of focus will be Fed Chair Janet Yellen's subsequent news conference, which investors will watch for hints on how quickly rates might be raised in the future.
Japan's Nikkei 225 is down 0.2 percent Wednesday while Germany's DAX is 0.1 percent higher. Futures for the Dow and S&P 500 are both up 0.2 percent.
The dollar, meanwhile, is down 0.1 percent against the Japanese yen, at 114.63 yen. The euro is 0.2 percent higher at $1.0628.
This article has been corrected to show that Narayana Kocherlakota's term was six years, rather than four.