Wall Street turns negative after Fed interest rate move

“We’ve had years of improving economic data with low inflation, it shouldn’t be a surprise that the Fed would come off their zero interest rate policy at this point”, said Barry Glassman, founder and president ofGlassman Wealth Services.

“The hints of further rate hikes moved the dollar because the market had priced in two or three more rate hikes in 2016”, Citi strategist David Wilson said. At the sound of the closing bell, Japan’s Nikkei had jumped almost 1.6 percent, Hong Kong’s Hang Seng Index had climbed 0.8 percent, while in Shanghai the stock exchange was up more than 1.8 percent.

The stock market and rupee rallied on Thursday as investors, inspired by the strength in Wall Street, took in their stride the US Federal Reserve’s decision to raise interest rates for the first time in a decade.

European shares have surged after the USA central bank increased interest rates for the first time since 2006.

For months, Chair Janet Yellen and other Fed officials have said they expected any rate hikes to be small and gradual.

“The US Fed rate hike and reference to gradualism are on expected lines”.

But rates on some other loans, like credit cards and home equity credit lines, will likely rise, though probably only slightly as long as the Fed’s rate hikes remain modest. We think the United States economy will clear the bar, and continue to expect four more rate increases in 2016, starting with the March 15-16 FOMC meeting. That rate had been near zero for seven years to foster an economic recovery after the USA mortgage crisis that sparked a global recession.

“The global macro dynamics from the beginning of a Fed rate hiking cycle are slowly playing out across the world”.

The move comes in response to positive signs in recent months that the United States economy is recovering.

The Fed’s rate hike might also pave the way for a Santa Claus rally, something that didn’t look possible last week when stocks sold off amid fears of a meltdown in the high-yield bond market. She added: “Americans should realise that the Fed’s decision today reflects our confidence in the USA economy”. And they forecast the rate will be 2.38 percent at the end of 2017 and 3.25 percent at the end of 2018, both a quarter-point lower than in September, according to projections released Wednesday.

Earlier the Fed said in its statement: “The Committee judges that there has been considerable improvement in labour market conditions this year, and it is reasonably that confident inflation will rise”.