Yellen: Fed to continue raising interest rate, reduce investment holdings

Yellen: Fed to continue raising interest rate, reduce investment holdings

Yellen: Fed to continue raising interest rate, reduce investment holdings

Sterling rose for a second consecutive day against the dollar on Thursday as investors covered some short positions after U.S. Federal Reserve Chair Janet Yellen's testimony knocked the greenback weaker against a broad basket of currencies.

US Treasury yields fell after Ms Yellen's testimony, with the benchmark 10-year note yield trading lower to 2.32 per cent. USA stocks were poised for a tepid open with Dow futures and the broader S&P 500 futures down 0.1 percent.

Hong Kong's Hang Seng Index jumped 1.28%.

In recent months USA inflation has moved further below the Fed's 2 per cent target even as the labour market, as measured by a 4.4 per cent unemployment rate, has strengthened.

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"She said rates won't have to rise much further to get to neutral, I thought that was key".

If progress on inflation stalls, "they are more likely to initiate a longer pause in the rate hike cycle", said Michael Gapen, chief U.S. economist at Barclays Capital in NY. Yellen specifically said that this normalization plan is expected to begin this year.

On Wall Street, the Dow Jones index shrugged off yesterday's anxiety - a knee-jerk reaction to the emails Donald Trump Jr released - and went back to hitting fresh record highs.

On Wednesday, Fed Chair Janet Yellen, testifying perhaps for the last time on Capitol Hill (her term expires early next year, and President Trump isn't likely to renominate her), seemed to do an about-face in saying that rates won't necessarily rise if inflation doesn't.

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An index of airline stocks .XAL was up 2.3 percent after the No. 1 US airline, American Airlines Group Inc AAL.O , reported quarterly results that beat expectations and its shares rose 4.2 percent.

The comments were part of Yellen's bi-annual report to Congress, where she faced tough questions from legislators. It rose to 4.9385 yuan from 4.9118 yuan and traded at 56.47 pence from 56.30 pence. He explained that the main mystery of the USA economy lately has been why low unemployment growth has not translated into stronger growth of wages and prices. "The last decade, something like 1.1 percent", Yellen said, adding that labor force growth is also on the decline, which would pose a challenge.

"Further steps in the monetary policy normalization process will take place in the form of another rate hike (we expect in September) and the start of the reduction of the huge Fed balance sheet (probably in December, in our view); and that this process will be gradual".

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