In fact, in the Summary Economic Projections that accompanied the interest rate decision, the Fed’s median forecast for GDP growth for 2017 actually ticked higher, up to 2.2%, from 2.1% in March.
Bond yields didn’t move much after the Fed’s announcement at 2 p.m. Adjustable mortgage rates were mixed, with the 3-year ARM slipping to 3.48 percent while the 7-year ARM climbed to 3.60 percent. It intends to start the draw-down with small monthly cuts of $6 billion of Treasury debt and $4 billion of mortgage-backed securities, and gradually increase them thereafter.
In her post-meeting press conference, the Federal Reserve’s chairperson, Janet Yellen, warned that the Fed could implement its balance sheet unwinding process soon if the economy continues to perform as expected.
HONG KONG: The Hong Kong Monetary Authority raised interest rates after the Fed’s move, to help keep the territory’s currency at a stable rate against the US dollar.
The number of dissenting votes was taken as a sign by investors that the United Kingdom central bank is closer to ending the stimulus put in place after last year’s Brexit referendum. The core rate of inflation increased at just 1.7 percent on year, the fourth straight monthly deceleration and the slowest overall pace in two years. Softening commodity prices did little bolster arguments that inflation will pick up the pace, even as the USA labor market remains on strong footing – raising the specter that central bank officials made a policy error.
The implementation of its proposed balance sheet normalisation programme a gradual reduction in Fed’s holding of securities – this year, would also depend on how the economy evolves, it added.
The Fed has now raised rates four times as part of a normalization of monetary policy that began in December 2015.
Financial markets have been anticipating the increase. When the lending cost was higher in the US than in Korea during the two year period following August of 2005, a total of around 19-point-seven trillion won of foreign capital went out of the local stock market. In Asia, Japan’s Nikkei 225 ended the day marginally lower. A local expert says the US rate hike could actually help Korea resolve its massive household debt problem, which topped a staggering 1.2-trillion USA dollars in the first quarter.
KEEPING SCORE: Germany’s DAX fell 0.6 percent to 12,727.14 while the CAC40 of France sank 0.8 percent to 5,202.60. Some gains are expected on Wall Street later, with the futures for both the Dow and S&P 500 up 0.1 percent. It is roughly flat against the pound, at $1.2758.
Federal Reserve policymakers have raised their target for the benchmark federal funds interest rate by a quarter-point, to a range of 1 percent to 1.25 percent.