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Global shares fall on Fed rate hike, UK rate outlook

15 Juin 2017

After French inflation failed to meet expectations on Thursday, a disappointing inflation figure for the overall Eurozone would have a negative effect on the Euro to US Dollar exchange rate.

With a drop in manufacturing output offsetting increases in mining and utilities output, the Federal Reserve released a report on Thursday showing that US industrial production was unchanged in the month of May.

As a reminder, recessions have always been accompanied by higher interest rates in the post-1913 Fed era (although not every Fed tightening cycle has ended in recession). "The Fed isn't run by computers, it's run by people", says David Rosenberg, chief strategist at Gluskin Sheff + Associates, an asset management company in Toronto.

"We have more concerns on inflation than they do", Gapen said.

"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee chose to raise the target range for the federal funds rate to 1 to 1.25 percent", said the Fed in a statement after concluding its two-day monetary policy meeting.

"The rate hike signals that the Fed believes the economy is improving and is going to be resilient to those hikes", said Tara Sinclair, a professor at George Washington University and a senior fellow at the jobs website Indeed. However, the price of gold went down. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labour market conditions and a sustained return to two per cent inflation.

Data showed that New Zealand's economy grew 0.5 percent in the three months to March, lower than the 0.7 percent growth forecast in a Reuters poll and well below the central bank's forecast for 0.9 percent growth.

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L'argent provient en priorité des Etats-Unis (117 milliards de dollars), puis d'Europe (115 milliards) et des pays du Golfe (100 milliards).

In February, a key gauge of inflation, the so-called personal consumption expenditures price index (PCE), breached the central bank's 2 per cent inflation target, providing ample justification for the Fed's decision in March to raise interest rates for the third time since the 2008 financial crisis.

And the consequences range beyond USA shores. He said in an interview before the FOMC meeting that Yellen is relying out of necessity on the Phillips curve, which says that lower unemployment leads to higher inflation. Now the economy is far better off.

"We should want the Fed to raise rates because it signals something good about the underlying economy", said Tobias Levkovich, chief USA equity strategist at Citigroup.

Earlier on Thursday, the PBOC injected a net 90 billion yuan (S$18.24 billion) into the financial system via open market operations, saying it was doing so to counter "liquidity stress" from seasonal tax payments and maturing reverse repurchase agreements. They were saying they were confident they had a fix.

But the risks could simply be hidden.

In our opinion, if the Fed does ultimately tighten monetary policy by implementing both rate hikes and balance sheet normalization, UST yields may be susceptible to some upside pressure. "I would recommend they stay the course and earn the coupon". "They've boxed themselves in". Investors appeared rattled that the Bank of England came close to raising interest rates sooner than many had expected, and by reports the special counsel appointed to investigate Russian influence in the 2016 presidential campaign is now examining whether President Donald Trump tried to obstruct justice. The last thing Yellen wants is to go down in history as the person who took the baton and fumbled it. But Wall Street is attuned to signs of weaker economic growth, and the combination of sluggish growth and high interest rates, which slow the economy down, may have anxious investors. That's because it's counting on low unemployment to push up wages and prices.