Rising U.S. interest rates will punish the loonie even more

This is the fed’s first rate increase since June 2006, almost ten years ago.

The U.S. central bank began raising interest rates today from record lows, as it hiked its benchmark rate by a quarter of a percentage point. The yield on the 10-year Treasury note rose slightly to 2.29 percent.

In a detailed explanation of the committee’s thinking Yellen said the USA economy “has come a long way” since the aftermath of the crisis, although it hasn’t quite reached where she would like it to be.

The Fed’s policy statement noted the “considerable improvement” in the USA labour market, where the unemployment rate has fallen to 5 percent, and said policymakers are “reasonably confident” inflation will rise over the medium term to the Fed’s 2 per cent objective. Wells Fargo was the first bank to announce the rate hike.

“The Fed’s rate increase is potentially controversial because steps to increase market interest rates are usually justified by the argument that there is a need to slow the pace of economic activity in order to restrain inflation”.

The U.S. central bank is widely expected on Wednesday to hike its key federal funds rate by a modest 0.25 percent. The jobless rate is now at a seven-year low of 5%, close to the Fed’s target for full employment.

It’s a graph showing where the various members of the Federal Open Market Committee, or FOMC, think interest rates will be at the end of a given year. The operation is called a reverse repo (or repurchase) and has an overnight maturity, meaning the Fed will be monitoring and conducting these operations every day to maintain the target interest rate range. Likewise, credit cards and auto loans would see some change though it would likely several interest rate hikes before it’s felt by users.

But it means you could face higher interest rates on some loans.

How well-telegraphed was the Fed move?

“The currency is likely to remain fairly soft until the latter half of 2017, when we expect the first hints of a Canadian [interest] rate hiking cycle”, TD said. But the Fed opted to take its time, and its statement made clear that it’s going to stick to a gradual process to guide rates in the future-and mortgage rates will move up even more slowly.

Kevin Smith, executive vice president with Janney Montgomery Scott in North York, said the hike was in line with market expectations, and he noticed the stock market already responding positively to the news, with the Dow Jones up 100 points shortly after the announcement Wednesday afternoon.