US Fed raises key rates for first time under Trump

Jon Howard
Марта 17, 2017

The Fed last acted in December when it adopted only its second interest rate increase in a decade, but it has repeatedly cited the uncertainty surrounding economic outlook while details of Trump's economic policy program remain scarce.

Another potential effect of the Fed's move is a larger spread between 5-year fixed-rate and 5-year variable-rate mortgages, since the hike could result in higher rates for fixed-rate mortgage products in Canada.

The Fed raised its benchmark lending rate a quarter point and continued to project two more increases this year.

Fitch said it expects a total of seven hikes in 2017 and 2018, bringing the policy rate to 2.50 per cent compared to two rate hikes between the end of 2008 and 2016.

"We've been thinking about getting back into the market, so when I see interest rates going up, it concerns me because I think, 'Oh no".

United States interest rates are on the rise. The unemployment rate should fall to 4.5 percent at the end of this year and remain at that level through 2019, also unchanged.

The rate hike comes amid growing confidence that the economy is poised for more growth.

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Interest rates have been historically low since the Fed began cutting rates in 2007, as the financial crisis began.

On the other hand, the price index for personal consumption expenditures reached 1.9 percent in January, which marks its fastest annual pace in more than four years, just shy of the Fed's 2 percent target. Japanese stocks pared earlier losses ahead of the Bank of Japan's policy decision.

The Fed's statement said Kashkari "preferred at this meeting to maintain the existing target range for the federal funds rate".

The central bank expected the USA economy to grow at 2.1 percent in 2017 and 2018, little changed from the December forecast.

Traders' view on a March increase, as measured by interest rate futures FFH7 , jumped to 80 percent from 30 percent in reaction to a barrage of hawkish rhetoric from policymakers.

The increase "reflects the economy's continued progress toward the employment and price stability objectives assigned to us by law", Fed Chair Janet Yellen said in a statement. As investors become assured that they can get a similar rate of return without the market volatility, we'll start to see a significant shift out of stocks into bonds. Meanwhile, they project the US economy will grow 2.1% this year, unchanged from the Fed's earlier forecasts published in December.

Last week, DBS, a banking group from Singapore, raised its forecast for Taiwan's 2017 GDP growth to 2.5 percent from 2.1 percent, and expects no change in interest rates in Taiwan in the short term.

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