Federal Reserve raises benchmark interest rate 25 basis points

Fed raises target interest rate to 1.00%-1.25%

Fed makes no changes to 2017, 2018 funds rate projections

 

FOMC raised rates by 25 bp

 

The Federal Reserve said in today’s statement, “Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising moderately so far this year.

Job gains have moderated but have been solid, on average, since the beginning of the year, and the unemployment rate has declined. Household spending has picked up in recent months, and business fixed investment has continued to expand.

Near-term Risks ‘Roughly Balanced’

The Federal Reserve said in today’s statement, “Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further.

Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term. Near term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.”

The median projections of Federal Reserve Board members and Federal Reserve Bank presidents under their individual assessments for the Federal Funds rate at the end of 2017 remains at 1.4% and at 2.1% for 2018, unchanged from the median projections in March.

Addendum to Policy Normalization

The Federal Reserve announced that all participants agreed to augment the Committee’s Policy Normalization Principles and Plans by providing additional details regarding the approach the FOMC intends to use to reduce the Federal Reserve’s holdings of Treasury and agency securities once normalization of the level of the federal funds rate is well under way. For payments of principal that the Federal Reserve receives from maturing Treasury securities, the Committee anticipates that the cap will be $6B per month initially and will increase in steps of $6B at three-month intervals over 12 months until it reaches $30B per month. For payments of principal that the Federal Reserve receives from its holdings of agency debt and mortgage-backed securities, the Committee anticipates that the cap will be $4B per month initially and will increase in steps of $4B at three-month intervals over 12 months until it reaches $20B per month.

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Oil Tumbles as Gasoline Supplies Rise

Gasoline inventories increased by 2.1 million barrels last week

The EIA said new production from non-OPEC  producers will be more than enough to meet growth in demand next year

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NYMEX crude fell to $44.70 from $46.20 per barrel following the EIA inventory data which showed gasoline inventories increased by 2.1 million barrels last week.

The street had been expecting a draw of 500k bbls in gasoline supplies. The EIA inventory data also showed a 1.7M bbl fall in crude stocks. The street had been expecting a 2.5 M bbl increase, though the API reported a 2.8 M bbl increase on Tuesday.

The International Energy Agency also said new production from non-OPEC  producers will be more than enough to meet growth in demand next year thus offsetting any cutbacks from OPEC. The U.S., Brazil, Canada and other producers outside OPEC will increase output next year by the most in four years, the IEA said in its initial forecast for 2018.

U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.7 million barrels from the previous week. At 511.5 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year.

Meanwhile, distillate stocks were up 300k bbls, versus expectations for a 0.5 M bbl rise. Refinery usage rose to 94.4% from 94.1%.

Total products supplied over the last four-week period averaged 20.1 million barrels per day, down by 1.2% from the same period last year. Over the last four weeks, motor gasoline product supplied averaged over 9.5 million barrels per day, down by 1.2% from the same period last year. Distillate fuel product supplied averaged 4.0 million barrels per day over the last four weeks, up by 4.1% from the same period last year. Jet fuel product supplied is up 2.7% compared to the same four-week period last year.

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SS&C Technologies is For Sale

SS&C Technologies (SSNC) has recently reached out to several private equity firms to gauge interest

Carlyle Group LP paid about $942 million to take the company private in November 2005 and brought the company public in 2010

 

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SS&C Technologies Holdings Inc. (SSNC) has recently reached out to several private equity firms to gauge interest in a buyout of the financial software and services provider, reports Bloomberg.

SS&C Technologies Holdings, Inc. provides software products and software-enabled services to financial service providers in North America, Europe, Asia, Australia, and Africa. Its products and services allow its clients to automate and integrate front-office functions, such as trading and modeling; middle-office functions comprising portfolio management and reporting; and back-office functions, including accounting, performance measurement, reconciliation, reporting, processing, and clearing.

High Valuation

The company’s management team has so far failed to move beyond preliminary talks with buyout firms, which have balked at SS&C’s high valuation, the people said, asking not to be identified as the discussions aren’t public. Shares are trading close to all-time highs at $38.40, giving it a market value of about $7.8 billion.

SS&C has previously been under private equity ownership. Carlyle Group LP paid about $942 million to take the company private in November 2005. Carlyle held an initial public offering of the company in 2010, retaining a stake before fully exiting its position in 2013.

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