24 June, 2017
The Fed noted that the jobless rate is at a 16-year low, the job market is growing and inflation is low.
Fed futures markets now put the chances for another rate increase this year at below 50 percent. One-year NDFs are settled against the midpoint, not the spot rate. Yesterday, the Fed hiked rates for the second time this year and hinted at curtailing quantitative easing to reduce the current $4.2 trillion portfolio in Treasury bonds.
However, with the economy in the US much more improved at this time, it does not need as much monetary help from the Fed.
The Fed's announcement means its target for its benchmark interest rate, which influences consumer spending and business lending, will rise to between 1 and 1.25 per cent.
Meanwhile, Hong Kong's de facto central bank followed the Fed and boosted interest rates for a third time since December previous year, elevating the risk of a sell-off in the world's priciest housing market.
On Friday, the Bank of Japan is widely expected to keep its monetary policy unchanged, and reassure markets it will lag the Fed in tapering its massive stimulus programme, as Japan's inflation remains low despite a strengthening economy.
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. The weaker pound's impact on Britons' living standards started to reflect in the latest data releases and today's retail sales figure may fall sharply after increasing 2.3% in April.
Wednesday's decision brings the Fed's target for the federal funds rate, which covers overnight loans between banks, to a range of 1 percent to 1.25 percent.
The economy grew at a rate of 1.2 percent in the first quarter of this year, about half as fast as it did in the final three months of 2016.
Fitch said these developments would mark a significant shift in the global interest rate environment.
Therefore, she believes things are on track for the continuation of three rate hikes a year and balance sheet normalization, which she thinks may even begin in September. Mortgage rates are closely related to yields on long-term government bonds, which appeal to investors any time uncertainty, or low inflation, is in the air. The economy has now added new jobs for 80 straight months.
