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US Federal Reserve raises interest rates | US Federal Reserve raises interest rates |
(about 2 hours later) | |
The US central bank has, as universally expected, raised interest rates again in the face of a strengthening domestic economy. | The US central bank has, as universally expected, raised interest rates again in the face of a strengthening domestic economy. |
The Fed raised its target rate to 0.75-1.0 per cent on Wednesday, up from 0.5-0.75 per cent previously. | The Fed raised its target rate to 0.75-1.0 per cent on Wednesday, up from 0.5-0.75 per cent previously. |
Only one voting member of the Federal Open Market Committee, Neel Kashkari of the Minneapolis Fed, voted against the increase. | Only one voting member of the Federal Open Market Committee, Neel Kashkari of the Minneapolis Fed, voted against the increase. |
The FOMC members also stuck with their so-called "dot plot" projection of a total of three hikes in rates tin 2017, going against expectations in some quarters of a more aggressive forecast for monetary tightening. | |
That implies two further hikes later this year. | |
The dollar index initially slumped to 101.04 in the wake of the data having previously been at 101.5. | The dollar index initially slumped to 101.04 in the wake of the data having previously been at 101.5. |
10 year US Treasury bond yields fell more than seven basis points to 2.51 per cent. | |
The S&P jumped almost 1 per cent. | |
“In view of realised and expected labour market conditions and inflation, the committee decided to raise the target range for the federal funds rate,” the FOMC said in its statement. | |
“Near-term risks to the economic outlook appear roughly balanced.” | “Near-term risks to the economic outlook appear roughly balanced.” |
In her press conference immediately after the decision Fed chair Janet Yellen said: “Our decision to make another gradual reduction in the amount of policy accommodation reflects the economy’s continued progress/.Today’s decision is in line with that view, and does not represent a reassessment.” | |
Analysts speculated on the timing of the next move. | |
"Attention will now most likely shift to the June 14 meeting when many expect a further increase in rates," said Lee Ferridge, head of multi-asset strategy for North America at State Street Global Markets. | |
On Thursday the Bank of England will announce its own March interest rate decision, with economists universally expecting no change in the 0.25 per cent rate of borrowing. |