Economy

US Fed raises interest rates

US Fed raises interest rates”

The Federal Reserve raised interest rates for the third time in six months.

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 central bank updated its inflation projections to take account of a slowdown.

"The labor market has continued to strengthen", the Fed said in an upbeat statement published after a two-day meeting of its policy-making committee.

Fed decision: Ultimately we have seen the Federal Reserve revise down both its 2017 headline and core inflation forecasts by a touch.

The Fed has $4.2tn of U.S. treasury bonds and mortgage-backed securities on its balance sheet. The rate, which can fluctuate a bit daily, usually settles somewhere in the middle.

Uncertainty also surrounds the membership of the Fed's own policy committee.

Although monthly job gains have moderated, they still have been solid, while household spending and business investment has been expanding, the statement said.

In May, the unemployment rate dropped to 4.3 percent, the lowest level since 2001.

It was the Federal Reserve's outlook that made "Greenback" traders a little more optimistic.

The Fed said it expects U.S. inflation to be at 1.7 per cent by the end of this year, down from the 1.9 per cent previously forecast. Unemployment dipped to 4.3 percent in May, a 16-year low. Annual inflation is running at 1.7 percent. That was down from 1.9 percent in March.

Like the Bank of England in the United Kingdom, it embarked on a buying spree during the crisis to boost the economy by electronically creating new money to buy the bonds and securities.

Some news reports have mentioned leading candidates to fill the three vacancies on the Fed's seven-member board.

"Now that the Fed is apparently not as dovish as we thought and won't be reacting to weak inflation numbers, the Aussie and kiwi are naturally giving up their gains", Franulovich said. "I don't see them moving again this year, unless things improve dramatically", said Art Cashin, director of floor operations at UBS.

NOGUCHI: Fed officials raised interest rates today despite the fact that the latest readings on inflation show that it is not picking up steam.

Meanwhile, Yellen dodged questions about whether she would stay on for another term if President Donald Trump asks her to stay.

She said Americans now have more than a trillion dollars in credit card debt - debt that's getting more expensive. Most analysts believe the Fed will raise the federal funds rate - what banks charge each other for short-term loans - for the second time this year. German 10-year yields, the benchmark for borrowing costs in the bloc, rose 1 basis point to 0.24 per cent. Economists expect a rebound in the second quarter to at least 2 percent.

Pound investors have had little to be excited about this week, as United Kingdom political concerns persist and this week's domestic data has refreshed concerns about Britain's 2017 economic outlook.

Meanwhile, advance estimates of USA retail and food services sales for May decreased 0.3 percent from the previous month to 473.8 billion US dollars, the Commerce Department announced Wednesday. Recent data have suggested that inflation may even be slowing further.



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