Fed Raises Interest Rate by a quarter point

Xavier Trudeau
Juin 19, 2017

"Hence there is another rate hike on the table for this year". The Dow Jones industrial average gained 0.22 percent or 46.09 points to close at 21,374.56.

This is the second interest rate rise in three months, and most analysts expect that the Fed will increase rates once more this year.

Oil prices fell to a seven-month low overnight due to a build in USA gasoline stocks. But the central bank remained adamant that economic growth is raising moderately while inflation will start to rise to the bank's 2% target over the medium term. They forecast U.S. economic growth of 2.2 percent in 2017, an increase from the previous projection in March. They fell as low as 2.103 percent following the downbeat data, their lowest since November 10.

The Fed placed its interest rates at 0% during December of 2008 to give the bruised economy and collapsed housing market a boost. But the rate increase was already priced into most stocks.

Fed officials voted 8-1 to raise the federal funds rate to a range of 1 to 1.25 percent.

One member of the Fed dissented: Neel Kashkari, who wanted to keep the federal funds rate unchanged.

The Fed also said in its statement that it expects to begin shrinking its balance sheet starting sometime this year.

Economic data expected through the course of the trading session includes the Reserve Bank of Australia's bulletin at 9:30 a.m. HK/SIN and China foreign direct investment numbers for the month of May at 3:00 p.m.

London's FTSE 100 Index joined global markets in the red after Wednesday's USA interest rate hike and as oil prices remained under pressure.

"The Fed sounded hawkish, willing to look past the weakness in inflation and reiterating the need to normalize policy", said a BofA Merrill Lynch Global Research report after the release. Financial markets will take it in stride. US stock markets were relatively flat through afternoon trading, while the yields on 10-year Treasury notes had fallen to 2.11 percent.

The shekel continues strengthening against the dollar and against the euro today despite last night's decision by the US Federal Reserve to raise interest rates.

Copper fell 0.6 percent to $5,665 a tonne, having earlier hit a one-week low of $5,642, while Shanghai aluminium dropped 1.2 percent to $13,560 a tonne. In Asia, Japan's Nikkei 225 ended the day marginally lower.

Find out how soon the Fed's rate hike will affect you.

CURRENCIES: The dollar rose to 109.75 from 109.57 yen. It is roughly flat against the pound, at $1.2758.

"Washington, Jun 15 The Federal-reserve/6562" target=_blank US Federal Reserve has raised its benchmark interest rate by a quarter point to 1.0- 1.25 per cent and signaled another increase remains likely this year, despite the recent spate of weak economic data.

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