Exchange rates stable despite Fed rate hikes
- Author: Zachary Reyes Jun 21, 2017,
Jun 21, 2017, 21:07
Analysts tell the Washington Post that many people are unlikely to notice the effects of the rise in rates, though people with large mortgages or a lot of credit card debt may start to feel the pinch.
Bond yields didn't move much after the Fed's announcement at 2 p.m.
Earlier on Wednesday, the Labor Department reported consumer prices unexpectedly fell in May, the second drop in three months.
The MSCI All-Country World index was up 0.1 percent and has remained stuck in a tight range this month.
Fed members are expecting one more rate hike in 2017 and three in 2018, Fed forecasts showed.
"The U.S. rate hike was in line with expectations, and it will have little impact on the economy", said Lee Ju-yeol, governor of the Bank of Korea, echoing a view held by the finance minister.
The median estimate of the long-run neutral rate, which is seen as the level of monetary policy that neither boosts nor slows the economy, was unchanged at 3.0 percent.
"The economy is doing well, is showing resilience", Yellen said at a quarterly news conference.
The most interesting thing about this meeting is that it comes at a time when the Dollars has endured a less than stellar jobs report (some decried it as disastrous, ) and with inflation possibly slowing as forecasts for last month's CPI see it dipping from 2.2% back to 2.0%.
In her press conference after the announcement, Fed Chair Janet Yellen asserted that US economic growth appears to have rebounded enough to justify both higher rates and a return of Fed-held assets to the wider market.
The FOMC (Federal Open Market Committee) raised the Fed Funds rate by another 25 basis points on Wednesday June 14, the second such rate hike this year, and the fourth hike since December 2015. It would start implementing those policies this year, assuming economic growth continues.
U.S. jobless claims were slightly lower than expected at 237,000 in the latest week from 245,000 previously while there was a sharp increase in the New York Empire index to 19.8 for June from -1.0 in May.
CURRENCIES: The pound rose nearly a cent, from $1.2695 to $1.2781, after the Bank of England's statement - currencies tend to rise when rates increase. US shares looked set to open lower, with Dow futures down 0.3 percent and S&P futures off 0.5 percent. The Fed plans at least two more rate hikes this year.
In currency markets, the dollar is up to 110.22 yen from Tuesday's 110.04 yen. The S&P 500 lost 15.26 points, or 0.63 percent, to 2,422.66.
They forecast US economic growth of 2.2% in Y 2017, an increase from the previous projection in March.