USA central bank likely to raise interest rates today

Yet that won’t be the only news from the Fed. The Fed is expected to double its current US$300-billion cap or even make the program unlimited to ensure that borrowing is more expensive.

While financial markets have wobbled ahead of the Fed decision-oil prices have tanked and high-yield debt has come under pressure-economists at Nomura believe the selloff was unlikely to delay a rate hike.

An official statement by the Federal Reserve will be released at 2 p.m. EDT, after which Chair Janet Yellen will hold a press conference.

One of the Fed’s dual mandates is to maximize employment. Emerging markets like Brazil brace for U.S. Fed’s rate hikeCCTV America’s Paulo Cabral reports from Sao Paulo. This would create major credibility issues, a common occurrence with many central banks this year, and leave the markets questioning whether a “more transparent” Fed is actually of any benefit at all. “Wages and prices are clearly growing too slowly”. Inflation is running well below the Fed’s 2% target. There are projections for growth, unemployment and inflation (how fast prices go up). Inflation rose to 0.2 percent in November from 0.1 percent in October. The Fed took that as a sign of economic fragility. Past surveys show that many economists expected the first hike to be in 2010.

To help the economy recover from those bad times, the Fed started cutting interest rates in 2007, and then kept cutting. But that was before China roiled global markets last summer with a surprise devaluation of its currency.

Policymakers at the US Federal Reserve will decide on interest rates today amid widespread expectations for the first hike in almost a decade.

Questions remain on how aggressively the Fed will rely on these tools and, later, when and how much it will shrink its portfolio.

But in an interview with the Financial Times, Bank governor Mark Carney appeared to play down the prospect of policy makers at Threadneedle Street following suit on a Fed rate rise.

An increase in the Fed’s benchmark rate, from near zero, would be the first since June 29, 2006.

The benchmark 10-year Treasury yield was little changed on Wednesday at 2.27 percent as of 6:39 a.m.in NY, according to Bloomberg Bond Trader data.

The expectation, roughly, is that an increase in interest rates will allow the banks to earn more on the liquid assets they are holding.

But the Brazilian real, which has lost 31 percent in value against the dollar this year, is expected to drop from about 3.81 per dollar on Wednesday morning to below 4 to the US currency if the rate hike is made as expected.

“The FOMC is likely to stress a gradual pace of rate hikes and there may be dovish dissent…markets may selloff modestly on the announcement but it should not trigger a sharp tightening of financial conditions”, he added. She might be able to do so by accompanying a rate hike Wednesday with assurances that the pace of future moves would be modest and gradual and would occur only if the economy further improved.