US Federal Reserve raises rates and trims outlook for 2019 rate increases

US Fed raises lending rate, signals slower pace | Bangkok Post: news

Since the Fed typically moves in increments of 0.25 percentage points, that means the neutral position could be reached with a single additional bump.

Opening losses for the heavyweight mining and financial sectors weighed on the market, while energy and healthcare stocks were also down early. The Standard & Poor's 500 index shed 1.54 percent, while the Nasdaq dropped 2.17 percent.

Economic concerns have wiped out 5,500 points, or 13%, from the Dow since the October 3 record high.

ANZ led the losses for the big banks, down 1.21 per cent to $23.65 a day after following its rivals in copping a first strike on executive pay. But bond prices surged, sending yields lower.

Markets across Asia are nearing gloomy milestones, with the Topix and South Korea's Kospi heading into bear market territory, or down over 20 percent from their recent highs, to join Shanghai and Hong Kong's Hang Seng.

The Aussie has fallen, buying 71.14 U.S. cents, down from 71.93 USA cents on Wednesday.

On Wednesday, Fed officials issued an updated set of forecasts that showed that they expect two rate increases in 2019.

When the Fed Funds Rate is lowered, it makes cash more easily available and can help strengthen the economy, while an increase of the Fed Funds Rate can cause cash to become more scarce, which can have a detrimental impact on the economy.

The Dow Jones industrial average lost 415 points, or 1.8 per cent, and closed at 22,443.

U.S. stocks are on track for their biggest December decline since the Great Depression in 1931.

The Tokyo market opened lower, extending losses in USA shares amid worries the Fed would hike rates at a faster pace than expected, analysts said.

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In local finance news on Thursday, Dulux Group and Incitec Pivot are scheduled to hold their annual general meetings, while November's labour force figures are due from the Australian Bureau of Statistics at 8.30am.

The Fed raised key overnight lending rate rates by 0.25 point as expected to a range of 2.25 percent to 2.50 percent, after weeks of  market volatility and calls by U.S. President Donald Trump for the Fed to stop raising interest rates.

In a unanimous decision, the Fed delivered on what some economists called a "dovish hike", raising the target range for the federal funds rate by 0.25 point, with 2.5 percent at the high end, while providing the clearest signal to date of a cautious stance moving forward, especially as it keeps an eye on potential worldwide risks.

Mnuchin said computerized program trading is driving stock prices down further, adding that he believed markets were disappointed in Powell's comments at a news conference following Fed's latest policy statement. The Fed Funds Rate is one of the most closely watched economic parameters since it determines the interest rate on interbank loans.

The S&P 500 fell 61 points, or 2.4 percent, to 2,445. "If it had been more hawkish, investors would have anxious. the Fed would kill off yet another recovery". As I've mentioned, most of my colleagues expect the economy to continue to perform well in the coming year.

Observing that neither the pace nor the ultimate destination of any further rate increases is predetermined, Powell said the Fed will adjust monetary policy as best it can to keep the expansion on track, the labour market strong and inflation near two per cent.

The Fed's move, in spite of warnings from President Trump, seems certain to anger him.

"We will continue to monitor global economic and financial developments and assess their implications for the economic outlook", Powell said at a post-meeting news conference.

The central bank has raised rates with steady regularity as the United States economy has strengthened.

There are concerns the swiftly growing economy could face struggles next year as the financial boost from the government's spending and $1.5 trillion package of tax cuts ceases to have as strong an effect and the global economy slows down.



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