How Fed hike will affect mortgages, car loans, credit cards

Fed officials hinted that it will hike interest rates two more times this year, as it had previously anticipated. The first was in December 2015.

However, they did not flag any plan to accelerate the pace of monetary tightening, with the policy-setting committee reiterating that future rate increases would be “gradual”.

The rate hikes, he said, can be viewed as positive signs that the economy continues to be strong and not headed into a recession.

Adrian Lowcock, investment director at Architas, pointed to the equity markets which have reacted positively to comments from the United States central bank. Eastern time, closed up 112 points.

It is only the third time rates have been hiked since the 2008 financial crisis and comes as the world’s biggest economy sees steady economic and jobs growth.

The S&P 500 gained 0.8% to 2,385.26 today, while the Dow Jones Industrial Average advanced 112.73 points, or 0.5%, to 20,950.10. The Bloomberg Dollar Spot Index dropped 0.2 percent on Thursday after its 1.3 percent post-FOMC drop.

US Labour Department data on Friday showed that total non-farm payroll employment in the country increased by 235,000 in February.

The debt issue for Malaysia will be an albatross for the economy in the years ahead, and if growth is meandering along, then there will be pressure on people, companies and the Government should interest rates in the U.S. close in on the normal range.

Federal Reserve Chair Janet Yellen speaks during a news conference in Washington, D.C., on Wednesday.

A rate hike at the conclusion of the Fed’s latest two-day policy meeting is already baked into bond yields and financial markets overall, with investors putting the likelihood of such a move at 95 percent, according to CME Group’s FedWatch program.

The central bank on Wednesday raised rates by a quarter point to 0.75-1.00 percent, responding to the continued strength in the labor market and a pick up in inflation.

The Federal Open Market Committee said in its statement that the labor market has continued to strengthen and economic activity has expanded at a moderate pace.

“The most direct impact will be felt in those economies that have high external financing needs relative to their foreign exchange earnings and reserves”, the report said. The so-called normalisation of rates is underway. Keeping rates too low limits the Fed’s monetary policy options when responding to economic turmoil. Fitch Ratings believes that the latest U.S. rate hike could mark the beginning of a significant shift in the global interest rate environment, with benchmark USA policy rates rising more over the long term than current market expectations. Markets will also be watching for the Dutch election result.

Aside from the Fed, rate decisions are expected form the Bank of England and the Bank of Japan.