Growth worries push stocks lower, Fed hike lifts dollar

Federal Reserve Raises Key Interest Rate

"In view of realized and expected labor market conditions and inflation, the committee made a decision to raise the target range for the federal funds rate to 1 to 1-1.25 per cent, " Fed said, adding, "The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 per cent inflation".

If that happens, the changing interest rate gaps between the United States and other countries would inevitably lead to significant amounts of Global capital flowing out of the developing and emerging market economies and into the US. It plans to reduce its massive balance sheet gradually, beginning later this year. The plan would involve halting reinvestments of the growing amounts of maturing securities. Yellen stated that there is no specific fund rates level that could trigger the process of balance sheet normalization. From there, the "cap" will increase by $6 billion every three months over the course of a year until it hits $30 billion a month. Even so, numerous barometers the Fed monitors most closely have given it the confidence to keep gradually lifting still-low borrowing rates toward their historic norms. The dollar.DXY was largely flat against a basket of currencies after reversing earlier losses, while the price of gold fell. A local expert says the USA rate hike could actually help Korea resolve its massive household debt problem, which topped a staggering 1.2-trillion US dollars in the first quarter. The 126 basis points fall in Indian bond yield and the surge of 23% in the Sensex since December 2015 pours cold water over fears of dollar outflows as a result of the Fed raising rates in the US. Lee Ju-yeol's recent hint at monetary tightening, the Fed's move raises concerns that higher market interest rates will weigh on Korean households, whose disposable income will be reduced due to higher repayments for their borrowing.

They forecast US economic growth of 2.2 percent in 2017, an increase from the previous projection in March.

KEEPING SCORE: Germany's DAX fell 0.9 percent to 12,690 while the CAC40 of France sank 1.1 percent to 5,188. Traders only see about a 17 percent probability of a September hike, even though officials left their median projections for the path of rates unchanged for 2017 and 2018. Fed expected U.S. unemployment to end the year at 4.3 per cent instead of its previous 4.5 per cent forecast.

Читайте также: From regal to rustic, Trump heads to Camp David for weekend

ASIA'S DAY: Japan's Nikkei 225 stock index fell 0.3 percent to 19,831.82 and South Korea's Kospi sank 0.5 percent to 2,361.65.

"Long term Fed expectations remain very much supported - that is the main reason why the dollar is remaining supported for now". In reaction to the hike, the 10-year yield hit a low of 2.103 percent, its lowest level since November 10, 2016.

Higher rates have come as a welcome relief to banks. The decision which was taken on Wednesday was in the 8-1 vote.

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