US stock market opens lower

Nick Sanchez
June 15, 2017

But workers need more than low interest rates to make this happen.

The likelihood of a rate hike in September has significantly weakened, however, with futures rates showing just a 17 percent chance of an increase, down from 28 percent before the data release on Wednesday, according to CME Group's FedWatch.

Wall Street stocks were little changed early Wednesday as the market awaited a Federal Reserve interest rate decision following lackluster USA economic data.

And the consequences range beyond US shores.

The fed funds futures market is now pricing in a 96% chance of a rate hike this week. But with the USA economy much improved now, it needs less of the Fed's monetary medicine.

The most immediate effects, though, are generally on borrowers in the United States.

The Fed Chair Yellen stressed that inflation does not respond too much, or too quickly, to changes in unemployment, but said the FOMC expects economic growth to increase. Fed officials previously increased the rate in March to a range of 0.75 to 1 percent. They also are watching for the Fed's latest views on inflation and hints on how aggressive it will be in raising interest rates in the future. Third, housing prices should become cheaper as mortgage rates will increase. Sometimes they even move in the opposite direction. Higher mortgage interest rates could lower home prices and dissuade homebuilders from hiring, for example. Also, U.S. retail sales in May were the weakest in 16 months, data showed this morning. It actually fell for most of 2016, then jumped later in the year and peaked at 4.44 percent in mid-March this year.

Today's post-meeting rate announcement was being watched with particular attention because of the mixed signals the USA economy has been sending: Yes, unemployment seems low and certainly is low by recent historical standards.

U.S. treasuries were sharply firmer as the market anticipated lower inflationary pressures for the rest of the year.

But as Trump's tax and infrastructure spending proposals have stalled, investors' outlooks have dimmed. The yield on the 10-year bond was at 2.1310% from 2.2120%.

Short-term Treasury rates are another way to determine what the market is pricing in.

America, interest rates are going up. But the Fed maintained its forecast for three rate hikes next year. This process could put upward pressure on long-term borrowing rates. That's because the Fed doesn't have total control; banks and other financial players have a major say. The central bank had pushed rates to near zero in response to the financial crisis. So investors can earn more by investing in dollar-denominated assets.

Flags fly over the Federal Reserve Headquarters on a windy day in Washington, U.S., May 26, 2017. In part, the recent rise in negative-yielding debt is down to exchange rates, with the euro and the yen-which account for a lot of negative-rate bonds-rallying against the dollar.

Q. My credit rating isn't so great.

But let me answer the question Making Sen$e posed: How might higher rates affect American households? Tapering would have been very hard to adjust once it was announced, while caps can be far more data-dependent. "It's money in your pocket".

The U.S. central bank cited continued U.S. economic growth and job market strength, proceeding with its first tightening cycle in more than a decade.

Following the May meeting, the Fed kept the benchmark rate at 0.75-1 percent per annum.

Q. What if I'm a retiree invested in bonds?

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