Yellen says Fed to give banks more details on stress tests

The Federal Reserve raised interest rates on Wednesday for the second time in three months and said it would begin cutting its holdings of bonds and other securities this year, signaling its confidence in a growing us economy and strengthening job market.

The decision lifted the U.S. central bank's benchmark lending rate by a quarter percentage point to a target range of 1.00 percent to 1.25 percent as it proceeds with its first tightening cycle in more than a decade.

They said they expected Fed policymakers to raise interest rates one more time by the end of 2017 and then three times in 2018.

"Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely", the Federal Open Market Committee said in a statement.

Euro zone government bond yields rose, reflecting post-Fed moves in U.S. Treasuries, whose yields had earlier fallen after weaker-than-forecast inflation and retail sales data triggered alarm about the underlying health of the U.S. economy.

This is the second interest rate rise in three months, and most analysts expect that the Fed will increase rates once more this year.

Those factors mean the Fed's preferred inflation measure will remain below the two percent target for some time, but will gradually rise to the target level over "the medium term".

Despite inflation coming in below the Fed's target, the central bank said it would raise the benchmark interest rate by 25 basis points.

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 US economy.

A Reuters poll of 21 of the 23 primary dealers that do business directly with the Fed showed 14 of them now believed it would announce the start of its balance sheet normalisation at its September 19-20 policy meeting. It is also cited that United States economic growth and job market strength as reasons for raising its standard interest rate. The process could start "relatively soon", Fed Chair Janet Yellen said.

The US market closed mixed on US Federal Reserve decision.

Experts said that the State Bank of Việt Nam's policies on exchange rates helped the market avoid external shocks, adding that the Fed rate hikes would not have significant impacts on VNĐ/USD exchange rates. Stock and bond prices weakened after the Fed's moves as some investors anxious that the actions would throttle back economic growth.

WALL STREET ON WEDNESDAY: The Standard & Poor's 500 index edged 0.1 per cent lower, to 2,437.92. Higher rates make it more expensive for companies and consumers to borrow money, affecting everything from loans to credit card rates to home mortgages.

The Federal Reserve is hiking a key interest rate for the second time this year and is planning to reduce the size of its $4.5 trillion balance sheet as well.

  • Zachary Reyes