Yellen Sets High Hurdle for Reducing Fed’s Massive Bond Holdings
Federal Reserve Chair Janet Yellen set a relatively high hurdle for shrinking the central bank’s balance sheet, leading some analysts to conclude that such a move won’t occur this year. She told the Senate Banking Committee on Tuesday that the Fed’s focus was on raising interest rates to keep the economy in balance, and not on reducing its holdings of bonds. Rates first need to reach sufficiently high levels that the Fed feels it has some room to cut them to offset a weakening economy. Only then would the central bank begin to shrink its $4.5 trillion balance sheet, she said.
U.S. rate hike prospects prop up German yields at one-week high
Europe’s benchmark German bond yield hit a one-week high on Wednesday ahead of U.S. inflation data that could further increase what is still seen as an outside chance of an interest rate rise in the world’s largest economy next month. Fed chair Janet Yellen said on Tuesday that despite considerable uncertainty over economic policy under U.S. President Donald Trump, the central bank is likely to raise interest rates at an upcoming meeting. Most analysts still think that hike is likely to come in June, but traders see around an 18 percent chance of a hike in March, up 13 percent from before Yellen’s statement, according to CME’s FedWatch tool.
China central bank lends $57.3 bln via MLF, rates unchanged
Feb 15 China’s central bank said on Wednesday it lent 393.5 billion yuan ($57.30 billion) to 22 financial institutions via its medium-term lending facility (MLF). Interest rates on the MLF loans were unchanged at 2.95 percent for six-month loans and 3.1 percent for one-year loans, the People’s Bank of China (PBOC) said on its official weibo account. The central bank lent 150 billion yuan for six months and 243.5 billion yuan for one year. The PBOC uses the MLF and the standing lending facility as tools for managing short- and medium-term liquidity in the banking system.