This leaves the market vulnerable to any hawkish spin from the Fed, which would likely slug Treasury prices while lifting the embattled US dollar.
The dollar rose to its highest in more than two weeks as solid readings on the USA economy helped strengthen the case for the Fed to continue tightening. Mortgage rates will be higher, as will credit card interest rates and auto loans.
The Standard & Poor’s 500 index, the benchmark that professional investors follow, likewise wasn’t changed much either. The Dow Jones industrial average rose 0.2 percent, to a record 21,374.56.
In explaining the second rate hike of this year and plans for more increases in the coming months, Federal Reserve Chair Janet Yellen said the move reflected progress in the world’s largest economy, which continues to add jobs at a solid pace. “The committee still expects inflation to move up and stabilise at around two percent in the next couple of years”, Yellen said. “Three percent is well above the current 10-year Treasury yield”.
“There is a lot to digest, and even some apparently conflicting signals, such as the fact that the Fed revised its own inflation outlook slightly down and yet kept its intention to raise rates again this year”, said Mitsuo Imaizumi, Tokyo-based chief foreign exchange strategist for Daiwa Securities.
Among the major exporters, Canon is higher by nearly 2 percent and Sony is advancing more than 1 percent, while Panasonic is losing more than 1 percent.
They increased their projections for economic growth this year to 2.2 percent from the 2.1 percent they forecast in March. Thomson Reuters CRB index.TRJCRB tumbled to 14-month lows, having fallen nearly 12 percent from this year’s high hit in January.
The median estimate of the long-run neutral rate, which is seen as the level of monetary policy that neither boosts nor slows the economy, was unchanged at 3.0 percent.
“Asset sales would be deferred, but their replacement-rate on the balance sheet tapered increasingly every three months”.
The 0.25 percentage point increase in the federal funds rate, which was widely expected by financial markets, was another validation of the recovery from the Great Recession.
The clear outline has been given by Fed on its decision to cut down its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities. Fed officials project growth of roughly 2 percent in 2017.
One FOMC member, Minneapolis Federal Reserve Bank President Neel Kashkari, dissented, voting against the rate hike, preferring to keep policy on hold for now.
“The Fed remains the test case for whether central banks can ever “normalise” rates”. Despite this, the finance ministry said it will strengthen its monitoring of the nation’s financial markets and come up with countermeasures. USA stock markets were relatively flat through afternoon trading, while the yields on 10-year Treasury notes had fallen to 2.11 percent.
LONDON, June 15 U.S. Federal Reserve policymakers gave markets a reality check by pushing ahead with a tightening of monetary policy despite some weak economic data, pulling government bond yields off their recent lows on Thursday.
KEEPING SCORE: Germany’s DAX fell 0.9 percent to 12,690 while the CAC40 of France sank 1.1 percent to 5,188. Shares in Southeast Asia also were mostly lower.
After having gained strong support after the weak USA data, gold hit resistance close to $1,280 and fell sharply to lows below $1,260.
In the currency market, the USA dollar traded in the mid 109 yen-range on Thursday. It is roughly flat against the pound, at $1.2758.