US Fed hike rates for second time this year
- Author: Zachary Reyes Jun 20, 2017,
Jun 20, 2017, 12:46
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.
Finance Minister Kim Dong-yeon brushed off concerns about the U.S. Federal Reserve's move to raise its benchmark interest rate, saying the impact of the Fed's decision on the Korean economy will be limited as the move had been widely expected.
Meanwhile, in view of stable economic conditions, the Fed plans to reduce its 4.5-trillion-U.S. -dollar balance sheet later this year and unveiled a detailed plan to trim its bond holdings. It intends to start the draw-down with small monthly cuts of $6 billion of Treasury debt and $4 billion of mortgage-backed securities, and gradually increase them thereafter. She noted that-among other things-stabilization in the labor force participation rate is signaling a stronger jobs market. The Federal Reserve has raised its key interest rate for the third time in six months, providing its latest vote of confidence in a slow-growing but durable economy.
USA stocks mostly fell while the dollar cut its losses on Wednesday after the Federal Reserve delivered a widely expected United States interest rate hike.
Germany's DAX fell 0.9 percent to 12,690 while the CAC40 of France sank 1.1 percent to 5,188.
The key interest rate for the Fed will now range from 1% to 1.25%.
The government reported yesterday that the Consumer Price Index, which is one measure of inflation, fell 0.1 percent in May from the month before.
The economy grew at a rate of 1.2 percent in the first quarter of this year, about half as fast as it did in the final three months of 2016. Put another way, when a 10-year Treasury on the Fed's books comes due, the money it gets back from that investment will not be used to go out and buy another Treasury.
MSCI's broadest index of Asia-Pacific shares outside Japan dropped 0.7 percent, led by resource shares. The dollar.DXY was largely flat against a basket of currencies after reversing earlier losses, while the price of gold fell.
The central bank forecast another rate increase later this year, alongside efforts to reduce its trillion-dollar holdings of US government debt.
Brent crude settled down 8 cents at $46.92 a barrel, while USA crude settled down 27 cents at $44.46, after touching a six-month low of $44.32 a barrel. It even rose by $15 to touch $1,288 per ounce but decreased after that to close at $1,260.