Fed's Yellen explains rate rise decision

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The US Department of Transportation says airline passenger complaints jumped by 70% in April after a series of high-profile incidents including the removal of a passenger from a United Airlines flight.

The Department said it received 1,909 complaints about airline service from consumers, up 70% on April 2016.

Many high-profile incidents on airlines have been captured on mobile phones in recent months, prompting congressional hearings with airline executives that raised questions about customer service and airline policies.

A slide in technology stocks pulled down the Nasdaq, while the S&P 500 ended slightly lower as investors worried about the pace of economic growth after weaker-than-expected inflation numbers and an interest rate hike from the Federal Reserve.

However, the Dow Jones eked out another record close, ending up 47 points, or 0.22%, to 21,374.56. The S&P 500 lost 2.43 points, or 0.1%, to 2,437.92, and the Nasdaq dropped 25.48 points, or 0.41%, to 6,194.89.

The Nasdaq cut its loss in more than half in a late rebound, having earlier fallen 1%, while bank stocks buoyed the Dow Industrials.

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Away from the dry - but important - world of US interest rates...

The Pentagon has raised concerns about China's access to artificial-intelligence-based technology developed in the US, according to Reuters.

The news agency says a leaked report proposes that export controls be updated to stop Chinese organisations being able to invest in some start-ups.

It suggests the move is needed to prevent their advanced algorithms being repurposed for the military by Beijing.

One expert said the report sounded credible.

"Quite a few people in the US security establishment see China as a likely potential adversary," Prof Trevor Taylor, from the UK's Royal United Services Institute for Defence and Security Studies, told the BBC.

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Asked when the Fed might begin reining back its balance sheet, Janet Yellen told the news conference that no decision had been made - but it could begin “relatively soon” if the economy continues to improve.

Gold turned negative on Wednesday after the Federal Reserve increased interest rates, while the dollar sharply pared its losses against a basket of major currencies.

The dollar was up about 0.12% against both the pound and euro. Gold fell 0.2% to $1,263 an ounce.

Don't hold your breath for any rapid normalisation of Fed policy as it unwinds the massive injection of money put into the economy since the financial crisis.

While Janet Yellen gave a clear outline of intentions to reduce the Fed's $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, her verdict on the pace of change was thus: "Like watching paint dry".

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The US economy is making "good progress" and a recent softening of inflation was transitory, Federal Reserve chairwoman tells a press conference.

Conditions are in place that are likely to justify a further rate rise this year, she said.

She also defended the Fed against criticism it has got its economic assessments wrong this year.

The central bank's credibility had not been "impaired", Ms Yellen insisted.

Quote Message: The big takeaways were as expected. What is noteworthy is that today Yellen laid out the balance sheet reduction plan with a lot more detail. Obviously with the big drop off in inflation this morning, which was a bit of a surprise, and the recent softening of economic data in general, it certainly gave the Fed pause with regards to September.

The big takeaways were as expected. What is noteworthy is that today Yellen laid out the balance sheet reduction plan with a lot more detail. Obviously with the big drop off in inflation this morning, which was a bit of a surprise, and the recent softening of economic data in general, it certainly gave the Fed pause with regards to September.

Quote Message: The market's not reacting much because the 25 basis point increase was widely expected. In the bond market we're still range bound. For investors it's still a yield grab in the credit markets even though the credit markets are very expensive. Bond investors don't have to worry about significantly higher rates for quite a while.

The market's not reacting much because the 25 basis point increase was widely expected. In the bond market we're still range bound. For investors it's still a yield grab in the credit markets even though the credit markets are very expensive. Bond investors don't have to worry about significantly higher rates for quite a while.

Quote Message: There's too many headwinds on the economic and geopolitical front to take up interest rates out of the recent range any time soon. We still think there's one more 25 basis point move, obviously data dependent but it might not happen until December if we continue to get soft inflation data." from Rich Taylor Portfolio manager, American Century Investments

There's too many headwinds on the economic and geopolitical front to take up interest rates out of the recent range any time soon. We still think there's one more 25 basis point move, obviously data dependent but it might not happen until December if we continue to get soft inflation data."

Quote Message: An interest rate rise today was highly expected and shows the Fed continues to be confident in moving towards normalizing monetary policy. Despite recent underwhelming jobs numbers, the underlying US economic data remains robust enough to warrant tightening.

An interest rate rise today was highly expected and shows the Fed continues to be confident in moving towards normalizing monetary policy. Despite recent underwhelming jobs numbers, the underlying US economic data remains robust enough to warrant tightening.

Quote Message: While the economy is bouncing back from a weak first quarter, earnings have been strong and even in the wake of continued political uncertainty, corporate confidence remains secure. The market has demonstrated that it is comfortable with gradual rate hikes and will be reassured that the Fed has today committed to its promises. We expect at least one more rate hike this year but incoming data will influence future decisions.”

While the economy is bouncing back from a weak first quarter, earnings have been strong and even in the wake of continued political uncertainty, corporate confidence remains secure. The market has demonstrated that it is comfortable with gradual rate hikes and will be reassured that the Fed has today committed to its promises. We expect at least one more rate hike this year but incoming data will influence future decisions.”

Quote Message: The next step for the Fed will be to reduce its balance sheet and stocks could experience bouts of volatility in the coming months due to both political surprises and Fed policy communications. The bull market still has legs, but investors should be aware that risks are elevated.” from Kully Samra UK managing director, Charles Schwab

The next step for the Fed will be to reduce its balance sheet and stocks could experience bouts of volatility in the coming months due to both political surprises and Fed policy communications. The bull market still has legs, but investors should be aware that risks are elevated.”

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US share markets ticked higher on the rate rise news - just. The Dow, S&P and Nasdaq edged back into positive territory. The dollar pared earlier falls and was down 0.4% about 15 minutes after the announcement.

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In its statement following a two-day meeting, the Fed's policy-setting committee indicated the economy had been expanding moderately and said a recent softening in inflation was seen as transitory.

The Fed gave a clear outline on its plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.

"The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated," the Fed said in its statement.

The quarter-point rise in the benchmark interest rate lifts the Federal Reserve's target range to 1%-1.25%.

It's the second time in three months rates have risen.

The Fed cited US economic growth and job market strength, and announced it would begin cutting its holdings of bonds and other securities this year.

Shares in US banks have fallen as investors await an imminent announcement from the Federal Reserve on interest rates.

The KBW Regional Banking index has fallen 2.5%, while the S&P 500 Banks index is down 1.6%, with weak inflation data seen as limiting the Fed's scope for action over the coming months.

JP Morgan Chase shares are down 1.4% and Goldman Sachs' are 1% lower.

The Fed's announcement will be followed by a press conference from Fed chairwoman Janet Yellen outlining her views on the US economy.

Although most economists are still forecasting a rate rise today, they have cooled on whether there could be one or two more hikes this year.

"In my view there's no question that we'll get a rate hike. What matters most in today's statement is how the Fed signals the next rate hike and perhaps even more critically what the reduction in the balance sheet will be," said Frances Donald, senior economist, Manulife Asset Management.

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The German car giant Volkswagen has agreed to provide a two year guarantee for car owners whose vehicles suffer failures after having them modified to remove so-called 'defeat device' software.

The company has recalled millions of vehicles in the wake of a scandal over the manipulation of emissions tests. But many owners have complained that their cars have subsequently broken down.

In the aftermath of the diesel emissions scandal, Volkswagen agreed to modify millions of vehicles in Europe which were equipped with software capable of undermining the emissions testing process.

However, some owners have since complained that their cars have suffered expensive failures, or lost performance, after having the modifications carried out.

Volkswagen now says that as a 'trust building measure' it will offer a two year guarantee covering 11 key parts of the fuel injection and emissions control system. Parts will be replaced free of charge, provided the car has been serviced properly.

Hybrid Air VehiclesCopyright: Hybrid Air Vehicles

The world's longest aircraft has successfully completed its fourth test flight, reaching the highest altitude it has attained so far.

The Airlander 10 - a combination of a plane and an airship - took off near its base at Cardington Airfield, Bedfordshire.

During the flight, which lasted about three hours, the 302ft (92m) long craft reached 3,500ft (1,067m).

Hybrid Air Vehicles said it was "a hugely successful flight".

Britain's blue chip FTSE 100 fell 0.35% to 7,474.4 points, while the mid caps managed to end in positive territory, up 0.58% at 19,974.7.

Housebuilders had suffered a sell-off in the immediate aftermath of the UK's general election, which resulted in a hung parliament, but a trading update from Bellway eased investors' concerns as the firm said demand had not slowed in the run-up to the election.

Barratt, the UK's biggest builder of homes, closed up 3.2%, making it the biggest gainer on FTSE 100. FTSE 250-listed Bellway rose 5.9%.

A fall in crude oil prices, following reports showing that US crude inventories were still increasing, weighed on energy stocks, which took most points off the FTSE.

Shares in BP and Royal Dutch Shell fell 1.8% and 1.3% respectively. Miners were also lower, with Anglo American and Glencore both down more than 2.5%.

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Netflix and Amazon are set to overtake UK cinemas to become the biggest box office moneymakers by 2020, says a report.

Consultancy firm PwC says revenues from streaming on-demand film and TV will grow by more than 30% to £1.42bn, edging ahead of the £1.4bn in estimated earnings from cinemagoers.

“Demand for internet video shows no signs of slowing down,” Phil Stokes, UK head of entertainment and media at PwC told the Guardian. “The figures do not signal the death of film."

US stocks have failed to kick on after opening higher at the start of trading. The Dow Jones and Nasdaq are now fractionally up, while the S&P 500 is down 0.12%.

There is nervousness ahead of an announcement later of the Federal Reserve's interest rate decision.

And a set of weak economic data has weighed on some shares, especially banks. US retail sales recorded their biggest drop in 16 months, while consumer prices fell unexpectedly in May, raising questions about the Fed's ability to further tighten monetary policy.

While traders polled continued to see a more than 93% chance for the Fed to raise rates at the end of the two-day meeting on Wednesday, they dialed back the odds of a third hike this year.