Economy Watch: Fed Sure of Economy, Raises Rates, Promises Asset Sell-Off

The US Federal Reserve raised rates for the second time this year, bringing the key interest rate up to 1.25 percent.

But the estimate for the central bank's preferred measure of inflation, the PCE price index, was cut three-tenths to 1.6 percent, while the core PCE, which excludes volatile food and energy prices, was cut two-tenths to 1.7 per cent, according to the Summary of Economic Projections.

Shortly after the opening bell, the Dow Jones Industrial Average fell 87.86 points, or 0.41 percent, to 21,286.70.

Art Cashin, the head of New York Stock Exchange floor operations for UBS, said he doubts the Federal Reserve will be able to raise interest rates again this year because of underlying weakness in the usa economy. The current unemployment rate and personal consumption expenditure suggest that the Fed target rate should be at 4.01 percent at the moment.

The Bank of England made a decision to leave the record low interest rate unchanged, in a split vote, as more policymakers sought a rate hike.

The US Federal Reserve (Fed) chose to raise rates by 25 basis points yesterday (14 June), the second move this year and the fourth in this cycle. Meanwhile, yields on benchmark 10-year notes slipped to 2.138% after briefly touching 2.1% earlier in the session.

GREECE DEBT: Attention in Europe will also turn to talks to get Greece the next batch of its rescue loans in time for it to avoid default in July.

For agency debt and mortgage-backed securities, the cap will be $4 billion per month initially, increasing by $4 billion at quarterly intervals over a year until it reaches $20 billion per month.Fed Chair Janet Yellen is due to hold a press conference at 2:30 p.m.

Asian markets fell overnight and European indices following suit, with the Cac 40 in France down almost 1% and Germany's Dax off 0.5%.

However, Anna Stupnytska, global economist at Fidelity International, said "emerging headwinds" in the USA economy meant a second hike would be unlikely this year. Benchmark U.S. crude fell another 22 cents to $44.51 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price global oils, rebounded, gaining 6 cents higher to $47.06 a barrel.

"The rise of dollar leads to a drop in oil prices".

The euro traded at $1.1210, after having hit a seven-month high of $1.1296.

"As well, yesterday's FOMC (Federal Open Market Committee) meeting was less dovish than expected as the Fed kept its policy forecasts unchanged despite clear deceleration in inflation and a couple of bad data points yesterday". When that was the time they dropped interest rates and bought up USA coffers and mortgage-backed securities to keep rates low.

A man looks at an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, June 15, 2017, in Tokyo.

  • Zachary Reyes