Dollar subdued as Trump probe, weak US data overshadow Fed

HONG KONG: The Hong Kong Monetary Authority raised interest rates after the Fed's move, to help keep the territory's currency at a stable rate against the US dollar.

The vote in favor of the hike was unanimous.

The Federal Reserve, as expected, raised the benchmark interest rate a quarter of a point yesterday, citing "progress the economy has made and is expected to make toward maximum employment and price stability".

The Bank also outlined its plan of reducing its balance sheet, which it expanded by buying bonds and other securities in order to tackle the housing crisis leading up to the great U.S. financial meltdown in 2008. The move follows a record run of jobs growth in the USA that has driven the unemployment rate down to its lowest level in 16 years. She noted that-among other things-stabilization in the labor force participation rate is signaling a stronger jobs market.

The Fed's preferred measure of underlying inflation has retreated to 1.5 percent, from 1.8 percent earlier this year, and has run below the central bank's 2 percent target for more than five years.

He said that the central bank must review the possible need for adjusting the extent of its monetary easing should the economy continue to improve.

The Fed raised the short-term rate it controls to a range of 1 percent to 1.25 percent, the second hike this year and the third in six months.

".because we also expect the neutral level of the federal funds rate to rise somewhat over time, additional gradual rate hikes are likely to be appropriate over the next few years to sustain the economic expansion".

Germany's DAX index is up 0.4 percent and Britain's FTSE 100 0.1 percent.

The Fed has not reached its 2% core inflation target over the past four years, with monthly consumer inflation released on Wednesday again weaker than expected. In a show of confidence, the Fed also upgraded its economic growth forecast and unemployment for the U.S.in 2017.

Experts said that the State Bank of Viet Nam's policies on exchange rates helped the market avoid external shocks, adding that the Fed rate hikes would not have significant impacts on VND/USD exchange rates. The amount of securities the Fed held on its balance sheet ballooned from less than a trillion dollars before the crisis to roughly $4-and-a-half trillion.

In a separate report, the department announced that USA import prices declined 0.3 percent in May after increasing 0.2 percent in April, while the price index for US exports declined 0.7 percent in May following a 0.2-percent advance in April.

Federal Reserve Chair Janet Yellen speaks in Washington, Wednesday, June 14, 2017, to announce the Federal Open Market Committee decision on interest rates following a two-day meeting.

  • Zachary Reyes