What You Need to Know About the Fed’s Rate Hike

Lifting rates too rapidly risks undermining the slow, moderate economic recovery from the Great Recession. The central bank’s statement said the economy will only merit “gradual increases” in rates, which are likely to remain low “for some time”.

“A truly “dovish hike”, something anticipated by a number of pundits, would have meant bringing those down closer to market implied future rates”. “If there are more hikes in 2016, it is impossible that money will not flow back to the United States”, said Jayant Manglik, president (retail distribution) with Religare Securities. At the same time investors were encouraged that Fed emphasized that further increases will be gradual.

“We are seeing some weakness but we are not seeing that hyperbolic fear that we have seen really inform the entire equity trading narrative as a result of crude’s collapse”, said Peter Kenny, equity market strategist at Kenny & Co LLC, in Denver. The EconoTimes content received through this service is the intellectual property of EconoTimes or its third party suppliers.

Experts, however, are anxious to see the Fed’s monetary policy course through the next year.

ARNOLD: And Yellen stressed that so far the Fed has only moved its target rate by a quarter of 1 percent, which is a very tiny baby step. And competition for buyers will spur them to take other steps to hold down rates, such as accepting lower profits.

“Korea’s external position remains healthy, with its current account balance safely in surplus and the short-term FX-debt-to-reserves ratio hovering at historically low levels”, said Lim Ji-won, chief economist for Korea at J.P. Morgan based in Seoul.

Hence, to consolidate the ongoing recovery process of the economy, the Fed made a decision to increase the interest rate.

The Federal Reserve raised the interbank borrowing rate today by one quarter of one percent or 25 basis points.

The Fed’s action was approved by a unanimous vote of 10-0, giving Yellen a victory in achieving consensus.

Banks that include Wells Fargo & Co., JPMorgan Chase & Co. and Bank of America Corp. raised their prime rate to 3.5 percent from 3.25 percent, according to Reuters.

Gold posted its biggest loss since March after the Federal Reserve’s first interest-rate increase in nearly a decade strengthened the dollar, curbing the appeal of owning precious metals. This is the rate banks pay when they borrow emergency loans from the central bank.

A currency trader walks by the screen showing the foreign exchange rate between the USA dollar and the South Korean won at the foreign exchange dealing room in Seoul, South Korea, Thursday, Dec. 17, 2015. The Fed is still promising that its next moves will be dependent on economic data.