Fed maintains taper, Japanese exports fall, Chinese home prices drop

The Federal Reserve decided to trim its bond-buying by $10 billion for a fifth straight meeting at its monetary policy meeting on Wednesday.

“Economic activity is rebounding in the current quarter and will continue to expand at a moderate pace,” Fed Chair Janet Yellen said at a press conference after the meeting.

However, she also noted that “underutilization in the labor market remains significant” and that while the Fed is likely to “reduce the pace of asset purchases in further measured steps”, it expects interest rates to stay low for a “considerable time” after the purchases end.

Fed officials also released a new set of quarterly forecasts, predicting that the fed funds rate will be 1.13 percent at the end of 2015 and 2.5 percent a year later. In March, they had predicted that the rate will rise to 1 percent at the end of next year and 2.25 percent in 2016.

Despite the quicker rate of rate increase being predicted, investors were optimistic enough to push the S&P 500 up 0.8 percent to another record high on Wednesday.

Meanwhile, data on Wednesday showed that the Bank of Japan's bond purchases has made it the single biggest holder of domestic government bonds for the first time.

However, the BoJ's monetary policy has done little to boost spending among Japanese firms. Nonfinancial companies’ holdings of cash and deposits rose 4.1 percent to 232 trillion yen at the end of March while their borrowing from private banks rose at the slowest pace since the final quarter of 2012.

And although the BoJ's monetary policy did weaken the yen, the effects on trade have not been wholly positive, with higher import prices pushing the trade balance into deficit.

That deficit did narrow in May as imports fell 3.6 percent from a year ago, the first decline in 19 months. However, exports also fell 2.7 percent last month.

While the US and Japanese central banks have been desperately buying bonds to stimulate the economy, such urgency has been less evident in China because of the latter's booming property market.

However, that boom may be coming to an end. A report on Wednesday showed that new home prices in China fell 0.2 percent in May, the first drop in two years. New home prices fell in 35 of the 70 cities surveyed.