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The Fed Raises Rates Again

29 Septembre 2018

The Fed, as expected, raised its benchmark rate by a quarter-point and indicated another increase this year is likely. Send the economy back into recession with higher interest rates, and government tax revenues, corporate sales and profits, and personal incomes all fall at the same time interest costs are soaring because of those higher rates. Australia's S&P ASX 200 added 0.1 percent to 6,192.30.

The Dow Jones industrial average fell 106.93, or 0.4 percent, to 26,385.28, and the Nasdaq composite lost 17.11, or 0.2 percent, to 7,990.37. Brent crude, the global standard, lost 0.6 percent, to $81.34.

Since November 2017, the BOK has kept its key rate at one.five percent, citing sluggish job figures and concerns over the U.S. Hong Kong's Hang Seng index slipped 0.4 percent to 27,715.67.

Investors have questioned whether the Fed will ultimately prove so aggressive, preferring to price in two increases next year. So they're always questioning, 'Is now the time for us to act?' " Owen says. But Trump told CNBC in July and Reuters in August that higher rates undermine America's competitive edge against other countries. According to the Federal Reserve Act, a Fed chairman can only be removed from office before his or her term ends "for cause", which isn't defined.

President Donald Trump criticised the decision, complaining that the Fed's actions are countering his efforts to boost the economy.

"Our economy is strong", Powell said at a press conference on Wednesday.

"The good news is that there is a deal, at last", said Francesco Galietti, head of Rome-based political risk consultancy Policy Sonar.

The Federal Reserve on Wednesday raised rates for the third time this year, indicating its confidence in the US economy.

"I'm not thrilled with his raising of interest rates, no".

It was the third interest rate increase this year by the Federal Open Market Committee. While measured labor productivity has tilted up in the past year, the growth in the labor force (and steady labor force participation rate) is exceeding the Fed's assumptions. Britain's FTSE 100 was also up 0.1 percent.

Bond yields didn't move much following the announcement.

Student-loan rates have been climbing along with the yield on the 10-year Treasury note, which has risen above 3 percent.

The Fed projects one more rate boost before the end of the year and three in 2019.

Later Thursday Italy's government agreed to target next year's budget deficit at 2.4 percent of gross domestic product, party chiefs said, ending a tussle between the ruling parties and Economy Minister Giovanni Tria.

Although the Fed has been revising up its real GDP forecasts-to 2.8% from 2.1% for 2018, and 2.4% for 2019-it has maintained its subdued 1.8% median estimate of longer-run potential growth. Rates are low by historical standards given an unemployment rate below 4% and, in recent months, accelerating economic growth. That wording had become less and less accurate since the central bank began increasing rates in late 2015 from a near-zero level, and its removal means the Fed now considers rates near neutral.

Powell said that the USA economy is in a "particularly bright moment", which would point to continued increases in rates.

The decision of which to heed looms large when the Feds interest-rate setters meet next week. By eliminating that statement, they're suggesting that those goals are now within reach and that rate hikes will likely continue.

The Federal Reserve is set to announce at 2 p.m. ET that after a two-day policy meeting, it chose to raise interest rates. Those people, he noted, will benefit from the Fed's increase in short-term rates.

While rates are still low historically, investors worry that a faster-than-expected rise in borrowing costs would unsettle markets and halt what's become the longest bull market for US stocks on record. USA stocks initially extended gains but fell later in the trading session, with bank and financial stocks getting hit hard.

The rise in the dollar helped perk up European stocks as the slide in the value of the euro and pound helps exporters.

The Fed is expected to lift its key rate on Wednesday from a range of 1.75-2 percent to a still-low 2-2.25 percent. Chairman Powell, in his first testimony to Congress in February of 2018, sensed the change, stating that "some of the headwinds the USA economy faced in previous years have turned into tailwinds".

Now investors are looking for clues about how high the Fed might go or signs its pace could accelerate.

The US economy registered a strong rate of growth in the first half of the year, setting it on a course for its best performance in more than a decade.

The Fed Raises Rates Again