Federal Reserve Raises Rates, What's the Impact on Asian Assets?
29 June, 2017, 09:10
Its key rates were hiked by 25 basis points to a target range of 1.00% to 1.25%, with the Fed citing continued economic growth and job market strength in the United States as the reasons for the rise.
"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee made a decision to raise the target range for the federal funds rate to 1 to 1.25 percent", said the Fed in a statement after concluding its two-day monetary policy meeting.
It cited continued U.S. economic growth and job market strength as reasons for raising its benchmark interest rate.
The Fed gave a clear outline on its plan to reduce its US$4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession. The Fed expects that inflation will not hit the current target, of two percent, and it has revealed plans for unwinding the post-asset purchasing balance sheet, which now totals nearly $4.5 trillion.
According to an addendum released with the policy statement, the Fed anticipates the balance sheet reduction plan would feature halting reinvestments of ever-larger amounts of maturing securities. Yellen stated that there is no specific fund rates level that could trigger the process of balance sheet normalization. From there, the "cap" will increase by $6 billion every three months over the course of a year until it hits $30 billion a month. USA data showed an unexpectedly large weekly build in US gasoline inventories and International Energy Agency (IEA) data projected a big increase in non-OPEC output in 2018.
The US dollar index, which tracks the US currency against a basket of six rivals, was flat on the day at 96.932 but above its overnight low of 96.323 plumbed after downbeat economic figures. The hike will push rates above 1 percent for the first time since the immediate aftermath of the collapse of Lehman Brothers in 2008.
Analysts said the rate hike was fully expected, but the central bank's more hawkish tone was somewhat surprising.
All of this negative data is causing growing speculation that the Fed. may have got it wrong and the economic slowdown is not "transitory" as they have claimed on numerous occasions recently.
Fed officials slightly boosted their expectations for economic growth this year, to 2.2 percent from a 2.1 percent projection in March. They continue to expect the economy to grow 2.1 percent next year and 1.9 percent in 2019.
At Bank for Investment and Development of Việt Nam (BIDV), exchange rates saw no change compared with Wednesday, being listed at VNĐ22,665 for buying rate and VNĐ22,735 for selling rate. The central bank maintained its outlook of three rate hikes total for this year, as it expects that a tightening labour market will lift inflation to the 2% target over the medium term.
US consumer prices, a measure of inflation, fell 0.1% in May, as a fall in energy prices, airline fares and apparel weighed on the pace of inflation, the labor department said.
NEW YORK, June 14 Long-dated U.S. Treasury yields tumbled to their lowest since early November on Wednesday after surprisingly weak data on inflation and retail sales overshadowed an interest rate hike by the Federal Reserve.
Fed officials now expect the USA unemployment rate to end the year at 4.3 percent, down from the 4.5 percent they predicted in March.
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, preferred to keep the rate at its current level and voted against the hike.
World stock markets and the dollar are firm ahead of an expected interest rate increase by the U.S. Federal Reserve.
The BSE Sensex rose almost 1 per cent on Wednesday to mark its second straight day of gains on continued foreign inflows, while stocks perceived.
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This, combined with the hostile political climate in North Africa and West Asia has threatened exports, causing the supply glut. The Iranian minister spoke highly of OPEC's performance in arriving at a consensus to cut output and help prop up prices.
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