US Federal Reserve hikes rates again as confidence in the economy grows
Jun 28 2017
Fed Chair Janet Yellen was holding a press conference at 2:30 p.m. EDT (1830 GMT).
Although the rate hike was widely expected, market participants had feared that a recent slowdown in economic activity would dampened expectations of a total three rate hikes in 2017.
However, Yellen said business and household confidence remain quite strong, and echoed the statement from the Fed's policysetting Federal Open Market Committee, which repeated its confidence that the usa economy would continue to expand "at a moderate pace" even with further gradual rate increases.
The Fed also announced it plans to start gradually paring back its $4.5 trillion in financial securities, most of which it bought after the global financial crisis.
Sixty-five percent of Americans carry a credit card balance from month to month says WWJ Business Editor Murray Feldman, for every $1000 they don't pay off - they'll pay about $25 more a year in interest. The rate, which can fluctuate a bit daily, usually settles somewhere in the middle. The prospect of higher interest rates will increase the opportunity cost of holding gold and had some negative impact on market confidence. By then, the Fed's forecast would put its key policy rate at 3 percent.
The Fed's revised forecasts reduced its estimate for unemployment by year's end to 4.3 percent from a March projection of 4.5 percent. Shares in Southeast Asia also were mostly lower.
"The Fed's approach to balance sheet normalisation sees reinvestment only to the extent that maturities exceed pre-set caps". Hiking interest rates is a tool that policy makers use to keep the economy from overheating or to dampen a bubble.
KEEPING SCORE: Germany's DAX fell 0.9 percent to 12,690 while the CAC40 of France sank 1.1 percent to 5,188. The Fed's target for inflation is 2 percent. After three rounds of so-called quantitative easing the Fed acquired $4.5tn worth of bonds, including $1.8tn in mortgage securities.
Now, almost a decade after the start of the financial crisis, the Fed laid out its plan to shrink the size of its balance sheet.
U.S. stocks edged lower and prices of U.S. Treasuries pared gains after the Fed's policy statement. "They've not really changed their plans yet and have a wait and see attitude", Yellen said.
In a statement it said: "The committee now expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated". Current Federal funds rate target 100-125 basis points.
The exchange rates at MB Bank dropped from VNĐ22,750 to a dollar on Wednesday to VNĐ22,720 this morning.
"I do think it is justified", she added, noting that the Fed may have been overly cautious in the past. Hiring has, however, "moderated" as the Fed pointed out and Yellen has expressed concern about the high number of people still in part-time work who are looking for full time employment.
The US jobless rate fell to a 16-year low last month. They continue to expect the economy to grow 2.1 percent next year and 1.9 percent in 2019.
But there have been some warning signs in the economic data. US employers continue to add jobs at a steady rate.