Fed Raises Key Interest Rate For The Fourth Time Since 2015

Any increase, however, would come in the face of persistent signs of weakness in the world's largest economy, which in recent months has seen slowing job growth and persistently low inflation.

Fed officials have concluded that the economy, now entering its ninth year of expansion, no longer needs the ultra-low borrowing rates they supplied beginning in the Great Recession. Those forecasts are far below the 3 percent annual growth the Trump administration has said it can achieve through tax cuts, deregulation and tougher enforcement of trade rules to protect American jobs.

Against the yen, the greenback fell by more than 1 percent following the data release to touch 108.95 yen, its lowest since April 21. Good news: 30-year mortgage rates are still very low at about 3.9%.

The Federal Reserve raised its short-term rate a quarter of a percent, to a range between one and 1.25 percent.

"The Fed has said in the minutes that they're trying to reach a balancing act between GDP, inflation and unemployment", said John Augustine, chief investment officer for Huntington Trust in Columbus, Ohio, which oversees $17 billion.

US government bond prices rallied broadly Wednesday, sending the yield on the benchmark 10-year Treasury note to a fresh 2017 low, as the latest signs of slowing inflation raise doubt over the Federal Reserve's plans for raising interest rates later this year.

At this level, it suggests investors expect the US inflation rate to run at an annualized 1.73% within the next 10 years, way below the Fed's 2% target. Only Neel Kashkari, president of the Minneapolis Fed bank, opposed the increase.

"The committee now expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated", the rate-setting Federal Open Market Committee said.

The Fed has $4.2tn of United States treasury bonds and mortgage-backed securities on its balance sheet. Fed officials project growth of roughly 2 percent in 2017.

The Federal Open Market Committee (FOMC) meeting will take place on Tuesday and Wednesday (June 13-14, 2017) and will be followed by an FOMC statement released at 2:00 p.m. ET on Wednesday, June 14, 2017. We expect at least one more rate hike this year but incoming data will influence future decisions. Fed officials previously increased the rate in March to a range of 0.75 to 1 percent.

ANALYST TAKE: "The backdrop to the Fed's policy announcement later today is one where U.S. equity markets moved to record highs yesterday, shrugging off last Friday's sell off in the tech sector", said Neil MacKinnon, global macro strategist at VTB Capital.

US stock markets were relatively flat through afternoon trading, while the yields on 10-year Treasury notes had fallen to 2.11 percent.

The U.S. Federal Reserve raised its federal funds rate by a quarter percentage point again today.

The dollar index was last down 0.6 percent at 96.437, after earlier touching its lowest since November 9 at 96.323. Japan's Nikkei 225 dipped 0.1 percent to 19,898.75 but South Korea's Kospi rose 0.7 percent to 2,374.70.

The S&P 500 was up 0.53 points, or 0.02 percent, at 2,440.88 and the Nasdaq Composite was up 1.88 points, or 0.03 percent, at 6,222.24. On the other hand, against a basket of major currencies dollar steadied.

The pound on Friday tumbled to a seven-week low at $1.2636 in the wake of Thursday's election result that saw the ruling Conservatives lose their majority, days before the start of crucial talks on leaving the EU.

  • Zachary Reyes