Asian markets lower after hawkish Fed, fresh trade war fears

Credit AP  JACQUELYN MARTIN				“The economy is doing very well. Most people who want to find jobs are finding them,” Fed chief Jerome Powell said Wednesday

Credit AP JACQUELYN MARTIN “The economy is doing very well. Most people who want to find jobs are finding them,” Fed chief Jerome Powell said Wednesday

What should be kept in mind is that the Fed's policy management has a huge impact on global capital flows. The market seems to be taking the Fed's latest move and guidance in stride.

CENTRAL BANKS: The Fed's rate hike was its second this year.

The average 30-year mortgage rate reached a high this year of 4.66 percent on May 24; the 15-year rate hit 4.15 percent that day.

The next graph should help you understand why we care about these kinds of estimates.

This report, released by Federal Reserve, includes the FOMC's projection for inflation and economic growth over the next 2 years and, more importantly, a breakdown of individual FOMC member's interest rate forecasts. Accordingly, one less individual saw three or fewer hikes.

The roughly 0.65 percentage point rise in the interest rate on a 30-year mortgage since last summer means an increase of Dollars 95 in the monthly payment on a USD 250,000 loan, about as much as the typical family received an extra take-home pay after the tax cut. To us, the pace of policy tightening remains measured, and modest.

"By just tapping the brakes more quickly, but not harder, the Fed is showing it's willing to let the economy and the expansion run", said Robert Frick, corporate economist with Navy Federal Credit Union. The Fed chief now speaks to reporters after every other policy meeting.

We were in the midst of a sales meeting on Wednesday when we paused to see the Fed's decision.

The 10-year US Treasury note yield rose to 2.9884 per cent and the 2-year yield rose to 2.5901 per cent.

The FOMC raised its forecast for core PCE inflation to average 2.0 percent this year, up from 1.9 percent forecast in March.

The Fed watches price measures closely to determine how fast to raise interest rates but has signaled that the two percent target is not a ceiling and that it would be comfortable with inflation rising slightly above that level for a time.

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But he said "having twice as many press conferences does not signal anything about the timing or the pace of interest rate changes".

"The Fed's rate hike this time should have only limited impact on South Korea", Deputy Finance Minister Ko Hyung-kwon said in a meeting with senior officials from the Bank of Korea and the Financial Services Commission.

The economic expansion has survived for nine years and is now the second-longest in history. Instead, they're looking to gradually lift rates enough to restrain the economy and hold back hiring.

Of course, at some point the party will come to an end.

"We know inflation is going to bounce around", he told reporters.

A day after the US Federal Reserve increased interest rates to 2 percent, silver made impressive gains and rose above the US$17-per-ounce mark.

This debt is based on the banks' prime loan rate, the interest rate used as a starting point for nonmortgage loans.

"China could be a little bit upset about trade because we are very strongly clamping down on trade", he said in an interview aired on Fox News Wednesday.

Quantitative easing (QE) is still occurring in Europe and Japan, and that does impact the U.S. market and perhaps push the yield lower than what it might otherwise be if QE was not taking place. "But that's not what we think will happen".

Powell declined to comment Wednesday on whether a record level of stock buybacks among companies would translate into higher wages for workers, but maintained he thought the administration's fiscal policy would boost the overall economy. Not since 1969 has the jobless rate been lower.

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