Global stocks seesaw after Fed flags USA inflation, bonds rise

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Global stocks seesaw after Fed flags USA inflation, bonds rise

Powell is expected to hew closely to the policies embraced by Yellen, who spearheaded the gradual move away from the near-zero interest rates adopted to nurse the economy back to health and spur job growth after the 2007-2009 recession.

Investors appear to be positioning for a non event when, in three hours, the US Federal Reserve makes its first monetary policy announcement of 2018 - its last with Janet Yellen as chair and open market committee (FOMC) member.

Voting for the FOMC monetary policy action were Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Jerome H. Powell; Randal K. Quarles; and John C. Williams.

Reaction to a statement from Fed policy-makers was mostly muted, but stocks seesawed after the yield on the 10-year U.S. Treasury note - the benchmark for world lending - briefly shot up to 2.75 percent, a level last seen in April 2014.

"Everything is pointing to a more aggressive Fed this year", Zandi said. No rate hike is expected in this meeting which does not consist of a press conference nor new forecasts.

The Fed will finish its two-day meeting Wednesday and issue a statement at 2 p.m.

On the economic front, private-sector employment increased by 234,000 from December to January, on a seasonally adjusted basis, beating market estimates, according to the National Employment Report released by the ADP Research Institute Wednesday.

After Yellen steps down this week, Powell's Fed will watch how quickly inflation speeds up.

The economy grew 2.3 percent in 2017.

Powell, a lawyer and investment manager by training, will be the first Fed leader in 30 years not to hold a Ph.D.in economics.

But the minutes from the December meeting revealed the conflicting views about how fast the committee will need to move to stay ahead of price pressures at a time when strong job creation has pushed unemployment down to a 17-year low of 4.1 per cent.

The Fed will also be keeping an eye on what happens at foreign central banks, including the European Central Bank and the Bank of Japan, as global growth becomes a focal point this year. Most likely, we will see the first rate increase following the March Fed meeting, while the next may occur during the September and December meetings. With the United States government injecting added fiscal stimulus in the form of tax cuts and higher federal spending, and asset prices arguably starting to look overvalued, some analysts predict the Fed under Mr Powell will have to assert itself more aggressively.

The euro rose on firm underlying euro zone inflation data.

Michael Pearce, senior USA economist at Capital Economics, agreed, saying the signal of a March rate hike can be small, even just a change in tone.

Yellen leaves the Fed having hit a key economic target given to the central bank by Congress, of attaining maximum employment.

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