Fed Mon. Policy Report: Economic strength will warrant further gradual hikes

Author: Greg Michalowski | Category: Central Banks

Details of the Fed Monetary Policy Report

  • US economic strength will warrant further gradual rate hikes; most policymakers expect inflation to move closer to 2% this year
  • Labor market in early 2018 appears near or a little beyond the full employment
  • If there is serious labor shortages, wage gains would have been larger than observed so far
  • Vulnerabilities in the overall US financial system are moderate on balance
  • Financial sector vulnerabilities are low: nonbank financial leverage increasing in some areas
  • It sees elevated valuation pressures across range of assets even after accounting for corporate tax-cut and current treasury yields
  • Sharp price increases for virtual currencies are consistent with elevated risk appetite
  • Household debt increasing modestly; leverage in business sector elevated particularly for speculative grade firms
  • commodity prices help explain low global inflation
  • sees increased margin credit to equity hedge funds
  • some major emerging economies harbor pronounced risks
  • US banks will capitalize with significant liquidity
  • hard to see much evidence of emerging supply constraints
The comments are sending stocks back toward the highs as some fear abates.  
Yields are steady but still down on the day.   The 10 year is down -4 bps
The USDJPY is trading higher and looks toward the 50% at 106.718.