US Federal Reserve raises interest rates by quarter percentage point

Traders will be poring over Federal Reserve Chair Janet Yellen's post-meeting comments for a handle on the bank's plans for monetary policyMore

Traders will be poring over Federal Reserve Chair Janet Yellen's post-meeting comments for a handle on the bank's plans for monetary policyMore

It was down a point to 2,439.

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

The committee signaled that more rises are on the horizon and that it "expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate". They are just catching up with reality: The jobless rate has dropped with unexpected speed — to a 16-year-low 4.3 percent in May.

Now the Fed said the inflation will be below its 2 percent target.

The energy sector was down 1.9 percent as oil prices weakened.

However, it raised its forecast for US GDP growth from 2.1 percent (y/y) to 2.2 percent (y/y) in full-year 2017 and sees a bigger decline in unemployment than its previous forecast. The move follows a record run of jobs growth in the USA that has driven the unemployment rate down to its lowest level in 16 years.

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"The Fed said the initial cap for Treasuries would be set at $6 billion per month initially and increase by $6 billion increments every three months over a 12-month period until it reached $30 billion per month in reductions to its holdings". If you've got a $75,000 mortgage or home equity loan - not on a fixed rate - you'll be paying about $15-$20 more in your monthly payment. Yellen said the balance sheet would be gradually rolled back in a process that would be as exciting as "watching paint dry".

The Fed has now raised rates four times as part of a normalisation of monetary policy that began in December 2015.

The labor market has continued to strengthen and that economic activity has been rising moderately so far this year.

The Fed also announced it will sell off some of the bonds and other securities it's holding. Meanwhile, the Bank of Japan begins its two-day meeting today.

Fed futures markets now put the chances for another rate increase this year at below 50 percent. Hiking interest rates is a tool that policy makers use to keep the economy from overheating or to dampen a bubble. "It's going to be the equivalent of about one rate hike a year". A report showed industrial production was flat in May, below the 0.1% increase anticipated by economists surveyed by The Wall Street Journal. US stock markets were relatively flat through afternoon trading, while the yields on 10-year Treasury notes had fallen to 2.11 percent.

The shekel continues strengthening against the dollar and against the euro today despite last night's decision by the US Federal Reserve to raise interest rates. The consumer price index declined in May for the second time in three months, the Labor Department said Wednesday.

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