Fed raises rates amid improved USA economic outlook

Jon Howard
March 18, 2017

The Dow Jones industrial average, which had been only modestly positive before the decision was announced at 2 p.m. The Nasdaq composite picked up 12 points, or 0.2 percent, to 5,869.

Wednesday's move brings the federal fundsrate to a range of 0.75 percent to 1 percent.

Anytime the Federal Reserve makes a policy decision, investors and the public have to answer two questions - was the action itself a surprise and what, if anything, does the action say about what the Fed is likely to do next?

Typically, the Fed raises rates in order to slow down inflation, even at the risk of choking off some economic activity. However, that has not been the case with the past two Fed rate increases.

Ficci said the monetary policy stance of the RBI is likely to be determined by a host of factors, the Fed rate hike being one of them.

Nonetheless, it's clear that the labour market is very much improved.

"We have seen the economy progress over the last several months in exactly the way we anticipated ..." But like the U.S., the Eurozone and the United Kingdom have put that problem behind them and have seen inflation rise markedly to levels close to their central banks' targets.

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Energy stocks also rebounded along with the price of crude oil, which jumped $1.14 to $48.86 a barrel to break a seven-session losing streak.

In a statement, members of the Federal Open Market Committee projected the rate to be 1.4 percent at the end of this year, 2.1 percent at the end of 2018 and 3 percent at the end of 2019, as the economy and inflation hit the Fed's targets. Core sales were up 0.1 percent vs. January's 0.8 percent, less than the 0.2 percent February gain expected. However delays in tax return payments may be holding spending back somewhat.

Announced earlier, US consumer prices increased 2.7 per cent year on year in February, the highest inflation rate since March of 2012, boosted by a rise in gasoline prices.

What rate exactly is the Federal Reserve changing and what type of direct impact does it have? "A strong economy will keep the housing market strong".

SWEET: Hostess Brands rose after it gave solid forecasts for 2017. What about the rapid rises in stock prices? Their students skew female, minority and low-income, and although they were linked to more than a third of student debt defaults in 2013, they accounted for just 7.5 percent of enrollees at degree-granting postsecondary institutions, according to the Education Department's statistics center. The yield on the 10-year Treasury note fell to 2.57 percent from 2.60 percent, and the 30-year yield fell to 3.15 percent from 3.18 percent.

Nigel Green, founder and chief executive of financial consultancy deVere Group, added: "This rate rise by the world's de facto central bank confirms that we're in a new era of higher inflation and higher interest rates".

CURRENCIES: The dollar dipped to 114.66 Japanese yen from 114.72 yen late Tuesday.

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