Fed Raises Key Interest Rate For The Fourth Time Since 2015


"For those consumers who have adjustable-rate mortgages, it's probably a good idea to consider refinancing and locking in a low rate before the Fed raises rates again".

His biggest decision will be whether to renominate Chair Janet Yellen to a second term. The Fed foresees one additional rate hike this year but gave no hint of when that might occur.

ANALYST'S TAKE: "Despite stubbornly low inflation, the Fed is widely anticipated to lift its interest rate tomorrow", Ric Spooner of CMC Markets said in a report.

Fed officials voted 8-1 to raise the federal funds rate to a range of 1 to 1.25 percent. On a 12-month basis, inflation has declined recently and, like the measure excluding food and energy prices, is running somewhat below 2 per cent. The Fed began buying the bonds after the Great Recession to try to depress long-term loan rates. The Fed said Wednesday that it would eventually allow a small amount of bonds to mature without being replaced - an amount that would gradually rise as markets adjusted to the process. The committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. Good news: 30-year mortgage rates are still very low at about 3.9%.

In terms of Chinese data, industrial output numbers showed output increasing 6.5% year-on-year in May, beating expectations of a 6.3% rise and coinciding with April's respective rate. Inflation was expected to be at 1.7 percent by the end of this year, down from the 1.9 percent previously forecast. Unemployment dipped to 4.3 percent in May, a 16-year low. The Fed still foresees prices, as measured by a gauge tied to consumer spending, rising 2 percent in 2018 and 2019, achieving its target.

The Fed would start with monthly reductions in Treasury holdings of no more than $6 billion and $4 billion in mortgage bonds.

Economic-growth projections were little changed, with the median forecast for 2017 moving to 2.2% from 2.1%.

World stock markets and the dollar are firm ahead of an expected interest rate increase by the U.S. Federal Reserve.

Germany's DAX index is up 0.4 percent and Britain's FTSE 100 0.1 percent.

Financial markets have been anticipating the increase. The S&P 500 .spx was last down 0.1 percent after being down 0.06 percent just before the decision.

In currency markets, the dollar is up to 110.22 yen from Tuesday's 110.04 yen. It is roughly flat against the pound, at $1.2758.

Markets have fully priced the prospect of the Fed raising its benchmark rate to a target range of 1.00 to 1.25 percent, but investors are waiting for any signals on the future path of rates or details on plans to shrink its massive balance sheet.