Monday, June 19, 2017

FED applies 2nd Rate Hike of 2017, interest now in 1.25%

Summary of FED decisions after FOMC meeting

- As expected, the FED raised the interest rate by 25 points, bringing the range to 1.00-1.25%, the third increase in 6 months, second of this year.

- There will be a RateHike more in this 2017. I say, is it really necessary to do it before the current regression of inflation?

- He repeated what 'current weak inflation is something momentary' (the same speech as Draghi and the ECB).

- Indicate that the labor market continues to strengthen and economic activity grows moderately. The growth projection was increased from 2.1% to 2.2%

- Maintains price stability through the 2% target for inflation accompanied by maximum employment.

- They outlined the plan to normalize the balance sheet, that is to reduce its fiscal debt of $4.5 billion, which would begin in the 4th quarter, with the progressive expiration and non-renewal of existing bonds, without selling any.

As predicted by analysts, despite the dismal inflation data (supported by the persistent low price of crude oil and the slow takeoff of the Trumponomics), the FED decided to give the Rate Hike, although it is estimated that if the trend continues, the next hike will hardly be give in September, month of the next FOMC meeting. Maybe it was not the best decision to give the RateHike yesterday after a weaker 2nd semester than the first, since the risks of recession or falling economic activity are latent (it is assumed if the GDP falls 2 consecutive quarters).

While the indices closed mixed, in the sectors led the 3 defensive par excellence: Staples XLP, Utilities XLU and Health XLV, giving an idea of ​​what may come in the following days. Today he opened session with the same tendency. And with the dollar strengthening, in these days the gold /GC and the Japanese yen may be the best niches to trade, to the downside.

After the announcement (2pm), the dollar and gold abruptly changed their trend. Not so the bonds that reversed at the end of the session the slight fall of the afternoon. The poor CPI inflation data came out of them.