Federal Reserve again raises its key interest rate

The rate hike was fully expected, but "what wasn't expected was the slightly more hawkish tone to the Fed statement", said Kathleen Brooks, research director at City Index, in a note on Thursday.

The Fed raised interest rates for the second time this year on Wednesday, by a quarter of a percentage point to a target range of 1 to 1.25 per cent. Forecasting one more rise this year, Fed policymakers said the USA economy was strengthening and viewed recent softness in inflation as largely transitory. The 10-year - 2-year U.S. yield spread also dipped lower, which suggests that the market believes the Fed will have to delay future rate hikes because of bleak economic outlook.

The U.S. dollar bounced back from seven-month low against a basket of currencies after the Federal Reserve raised interest rates and gave a first clear outline on its plan to reduce its $4.2-trillion portfolio of bonds.

"The decision to raise rates does not signal the beginning of "tight" monetary policy from the Fed, but it does mark another step towards normalisation, as well as confidence in the long-term recovery of the economy". This despite the fact the Fed hasn't actually hit its 2 percent annual inflation target on its preferred measure in more than five years.

Meanwhile, the New Zealand's benchmark S&P/NZX 50 Index closed 0.43 percent higher at 7,516.35 while at 06:00GMT, the FxWirePro's Hourly NZD Strength Index remained neutral at 42.33 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend).

"It just looks like the Fed is sticking to their story and the market remains highly skeptical that the Fed is going to be able to deliver just based upon underlying data".

Mueller is investigating alleged Russian interference in the 2016 US presidential election and possible collusion with the Trump campaign.

Retail sales data showed that British consumers are feeling the pinch from higher prices and weaker wage growth.

"The second half of this year will be all about kicking off changes to the balance sheet reinvestment programme, which in itself could have a small tightening effect for the overall economy".

The Fed's decision to raise rates, announced in a statement after its latest policy meeting, was approved 8-1, with Neel Kashkari, head of the Fed's Minneapolis regional bank, dissenting in favour of holding rates unchanged.

Japan's Nikkei share average fell in choppy trade on Thursday, after weak U.S. inflation data overshadowed an interest hike by the Federal Reserve. Fed Chair Janet Yellen stated her view in a press conference that the economy appears strong enough to withstand additional rate hikes, barring new indications of economic weakness.

In its news release Wednesday, the Fed said it expected inflation to remain somewhat below its 2 percent target in the near term but to eventually rise to meet that goal.

Stocks fell in Europe and Asia on Thursday as investor concern over the pace of U.S. economic growth overshadowed a widely telegraphed rise in Federal Reserve interest rates that lifted the dollar off recent lows.

Many other commodity prices are also under pressure.

Some economists suggested that even though the Fed foresees one more rate hike this year, the persistently low inflation may lead it to leave rates alone until 2018.

  • Zachary Reyes