Abril 26, 2018

Federal Reserve again raises its key interest rate

18 Junio 2017, 04:24 | Dolorita Barahona

The FTSE 100 has slipped after the US Federal reserve announced an increase in interest rates. Minneapolis Fed President Neel Kashkari dissented in Wednesday's decision.

Kashkari, who has been tipped as a potential successor to current chair Janet Yellen, has consistently warned against raising rates, fearing that it might harm the recovery.

In other words, the fourth rate hike has been accompanied by negative returns in the following year, but this is shaping up to be one of the exceptions.

"Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely", the Federal Open Market Committee said in a statement Wednesday.

The decision of the FED is not a fundamental factor affecting the manat rate against to the United States dollar, according to him.

That is the highest level since the year 2008 when rates were cut by the policymakers to encourage borrowing and spending after the financial crises.

Experts said that the State Bank of Việt Nam's policies on exchange rates helped the market avoid external shocks, adding that the Fed rate hikes would not have significant impacts on VNĐ/USD exchange rates. "Compared with the projections made in March, the median path for the federal funds rate is essentially unchanged", Yellen said, during a news conference.

The Fed now sees the unemployment rate ending the year at 4.3 percent, where it sits currently, rather than the 4.5 percent previously expected.

Meanwhile, the rate of inflation over the past 12 months has slowed to 1.9% in May from 2.7% just in February.

The Fed wants inflation to rise higher than that - to about 2 percent - because rising prices encourage us to spend now rather than wait.

That means broad United States economic growth has already run out of steam despite encouraging job data.

NOGUCHI: Greg McBride, an analyst with consumer financial site, says taken together, the Fed's moves have caused home equity and auto loan rates to increase about 1 percent over the last two years. Stocks continued to rise even when interest rates went up. Hiking interest rates is a tool that policy makers use to keep the economy from overheating or to dampen a bubble. Later in the day, the bond market focus is likely to shift to Greece eurozone finance ministers meet to discuss a deal with the International Monetary Fund (IMF) that could pave the way for new loans for Athens.

ANALYST VIEWPOINT: "Against the backdrop of mixed economic performances, Fed Chair Yellen had unexpectedly stuck to a more optimistic view on economic conditions", Jingyi Pan of IG said in a commentary.

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