US Federal Reserve hikes rates again as confidence in the economy grows

  • US Federal Reserve hikes rates again as confidence in the economy grows

US Federal Reserve hikes rates again as confidence in the economy grows

The Fed raised interest rates by 25 basis points, with a new target range of 1% to 1.25%.

The Fed voted to increase rates on Wednesday to 1.25% and maintained its own forecast that rates would rise at least one more time in 2017.

The VNĐ/USD exchange rates saw little changes this morning although the US Federal Reserve (Fed) raised interest rates on Wednesday on the confidence in a growing economy and strengthening job market in the world's biggest economy. In addition, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 percent, it said. More interestingly, policy makers set out a detailed plan to shrink the $4.5 trillion balance sheet by gradually reducing security holdings. The Fed said it will have a balance sheet "below that seen in recent years but larger than before the financial crisis" because banks need for higher reserves at the Fed.

"We think the fall in actual real rates is explained by the slowdown in potential GDP growth driven by demographics and weaker productivity growth, and by an elongated credit and monetary policy cycle".

This rebalancing could give the Fed the excuse not to hike rates as it would provide additional tightening, Hermes chief economist Neil Williams.

While the territory effectively imports USA monetary policy due to its currency peg, local banks have been reluctant to pass on higher rates to customers amid fierce competition for mortgages - heightening a property boom, as well as fueling depreciation in the Hong Kong dollar. They are just catching up with reality: The jobless rate has dropped with unexpected speed — to a 16-year-low 4.3 percent in May. Annual inflation is running at 1.7 percent.

The Fed's revised forecasts reduced its estimate for unemployment by year's end to 4.3 percent from a March projection of 4.5 percent.

Mortgage rates did not move much this past week, as the benchmark 30-year fixed inched lower and remains at the lowest level in seven months, according to Bankrate.com's weekly national survey. Neel Kashkari dissented the rate hike. Hiring has, however, "moderated" as the Fed pointed out and Yellen has expressed concern about the high number of people still in part-time work who are looking for full time employment. After a late tumble in technology stocks, the Nasdaq composite lost 0.4 percent, to 6,194.89. The economy has now added new jobs for 80 straight months.