Fed raises key rate, unveils plan to reduce bond holdings
- Author: Zachary Reyes Jun 17, 2017,
Jun 17, 2017, 19:43
The pound was down 0.2% at 1.27 United States dollars as the greenback was boosted by Wednesday evening's rate rise, but sterling rose 0.1% against the euro.
U.S. stock futures dipped and Asian shares were on the defensive on Thursday after a media report that U.S. President Donald Trump is being investigated by a special counsel for possible obstruction of justice.
Contrary to what many expected, Treasury bond exchange traded funds were among the best performers after the Federal Reserve raised benchmark interest rates for the third time in six months. These make up the Federal Reserve's so-called dual mandate, which Congress laid out and obligates the central bank to strive to maintain maximum employment and stable consumer prices.
The BottomLine: While the Federal Reserve has looked beyond recent data disappointments, the failure to see better growth in the second half could put additional rate hikes on hold and delay the start of balance sheet reductions.
The average 30-year fixed mortgage has a rate of 4.02 percent, the lowest since November 16, 2016, and an average of 0.24 discount and origination points. The FTSE 100 of Britain dropped 0.4 percent to 7,474.40.
The FED rate is one of the most effective and at the same time unsafe levers for raising the American economy.
The American increases are seen as a reversal of the Feds moves to battle the financial crisis and the recession.
Professor Yang Jun-sok and other Korean economy experts said that the South Korean central bank is now cornered into making a move for the economy sandwiched between capital outflow and household debt concerns. Bond yields hit their lowest level of 2017.
The rate hike should not come as a surprise for investors on Wall Street. Home Depot and Goldman Sachs contributed most of the blue-chip index's gain. The Nasdaq Composite Index dropped 60.09 points, or 0.97 percent, to 6,134.80.
ENERGY: Oil futures had plunged overnight after the USA government said oil supplies shrank only slightly last week while gasoline stockpiles grew. It fell $1.73, or 3.7 percent, to settle at $44.73 a barrel in NY.
Brent crude, the worldwide benchmark, was down 12 cents a barrel at $46.88. It had shed $1.72, or 3.5 percent, to close at $47 a barrel in London. "That is the main reason why the dollar is remaining supported for now", said Manuel Oliveri, currency strategist at Credit Agricole in London. The euro edged up to $1.1218 from $1.1217.