US Fed hike rates for second time this year


20 June, 2017

The Federal Reserve was able to modestly raise rates because of the USA economy's relatively strong performance, in comparison with the United States or Europe.

The rise in the yuan midpoint appeared to track the global dollar index, which fell after the Fed's decision.

The yield curve, however, flattened with the difference between short-dated two-year Treasury yields and benchmark 10-year yields narrowing to a difference of 78.58 basis points, the smallest since 9 September.

"I don't think it will affect the long-term mortgage rates that most people take, but things like credit cards, home equity lines, short term auto loans, things like that would typically go up by an equal amount, a quarter of a percentage point".

Experts said that the State Bank of Viet Nam's policies on exchange rates helped the market avoid external shocks, adding that the Fed rate hikes would not have significant impacts on VND/USD exchange rates.

Fed chair Janet Yellen (pictured above) said that the prospects for world's largest economy remained bright, with GDP growth of 2.2% now penned in for 2017.

The euro was down 0.3 percent at $1.1183, a six-day low, while the yen was flat at 109.58 per dollar. "They are expecting 2 percent, which may not be realistic". A neutral rate implies no negative effect on growth. The Hang Seng in Hong Kong dropped 1.2 percent to 25,565.34, but Shanghai's Composite index rose 0.1 percent lower to 3,132.49.

The US Federal Reserve has increased interest rates for the second time in three months. The Fed has long had a 2 percent annual target, but inflation has been much lower.

It means the USA central bank is scaling back its support for the economy as it continues to recover and grow.

Minneapolis Fed President Neel Kashkari dissented in Wednesday's decision. More interestingly, policy makers set out a detailed plan to shrink the $4.5 trillion balance sheet by gradually reducing security holdings. Fed officials project growth of roughly 2 percent in 2017.

Fed officials are wrapping up their two-day June meeting. It has been done for the second time in 3 months. Fed officials previously increased the rate in March to a range of 0.75 to 1 percent. It is bloated with the huge number of U.S. government bonds, or treasuries, and mortgage-backed bonds it bought in the years after the 2008 financial crisis in order to lower long-term interest rates and pump prime the economy with cash.

However, Yellen said business and household confidence remain quite strong, and echoed the statement from the Fed's policy-setting Federal Open Market Committee, which repeated its confidence that the economy will continue to expand "at a moderate pace" even with further gradual rate increases. The kiwi fell 0.29% to 0.7248 against the dollar after the data.

A man looks at an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, June 15, 2017, in Tokyo.

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