Treasury yields jump, stocks dip after Fed statement

Treasury yields jump, stocks dip after Fed statement

Yet she also noted a risk that tight labor markets could push up wage and price inflation to an extent that the Fed has to respond by hiking rates faster than expected, potentially risking a recession.

The Fed also announced it will begin a "drawdown"-a move to decrease the number of assets remaining on its balance sheet-next month".

Of course, this misses the obvious: The Fed is about to finally start the process of reversing years of QE-based bond-buying stimulus that's been responsible for the smooth and easy nature of the bull market since 2012. The FOMC statement released at the end of the review and the projections made therein suggest the USA central bank is still unsure of the economy's growth trajectory.

"We think that a lack of lendable supply of on-the-runs in a rising rate environment will have a much more pronounced effect", said RBC's Cloherty.

Yields on USA 10-year Treasuries jumped a hefty 14 basis points last week, but still trailed the United Kingdom where yields on 10-year paper surged 30 basis points. We expect Chair Janet Yellen to keep the possibility of a December hike firmly on the table.

But Central bankers have a hard juggling act to maintain against inflatioin and economic growth.

Canadian inflation and retail sales data due on Friday will close the week for CAD traders.

A currency trader watches computer monitors at the foreign exchange dealing room in Seoul, South Korea, Wednesday, Sept. 20, 2017.

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The USD/CAD rose 0.612 percent on Tuesday. Less certain was whether the US central bank would focus its remaining reinvestments on shorter-dated assets and accelerate the process - a decision it did not appear to make. Attention will turn to Wednesday's Fed decision, with a focus on details on unwinding part of the central bank's $4.5trn balance sheet.

Fed Chair Janet Yellen said in a press conference after the meeting that a fall in inflation this year remained a mystery and said the USA central bank was ready to change the rate outlook if needed.

US stock indexes were mostly higher in midday trading ahead of the Federal Reserve's latest economic and interest rate policy update.

In October, the Committee will initiate the balance sheet normalization program described in the June 2017 Addendum to the Committee's Policy Normalization Principles and Plans.

The Fed will scale back its holdings by $10 billion in October and raise that amount gradually in the months to come.

USA crude rose 1.5 percent to $50.65 per barrel and Brent was last at $55.86, up 1.75 percent on the day.

"In addition to the macro tailwind of higher rates, banks should benefit from regulatory changes that are now not reflected in share prices", David Kostin, Goldman Sachs chief equity strategist, wrote in a note to clients this week. The pickup in oil prices helped lift energy stocks. This article is strictly for informational purposes only.

The Fed wants the balance-sheet reduction to be as uneventful as possible to Americans on and off Wall Street. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.