Sunday, March 29, 2020

Fed Hikes US Interest Rate For First Time In A Year

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US interest rates have gone up 0.25% for only the second time since the 2008 financial crisis.

The official interest rate hike announced by Federal Reserve chair Janet Yellon doubles the former rate to 0.5%.

And she warned three more rises were on the way in 2017.

The nation had debated if rates would rise since the summer, but problems with economic data and the presidential election between Donald Trump and Hillary Clinton delayed the announcement until the last meeting of the Fed in 2016.

The rate was last increased in December 2015.

More rises on the way

“My colleagues and I are recognizing that the considerable progress the economy has made towards our dual objectives of maximum employment and price stability,” Yellen said.

“We expect that the economy will continue to carry on performing well, with the job market strengthening further, and inflation rising to 2% over the next couple of years.”

Outlining the Fed’s strategy for 2017, Yellon explained the country should expect a total interest rate rise of 0.75% probably in three 0.25% bursts, which would leave the rate at around 1.25% to 1.5%.

The aim is to pull inflation up to around 2% in the long-term, she added.

Battle with Trump

Yellon did not mention President-elect Donald Trump or his plans to cut taxes and spend billions of dollars on infrastructure projects which many have criticised as a potential block to economic recovery.

Trump has questioned the Fed’s independence and urged Yellon to increase interest rates several times without response.

Her term as Fed chief ends in February 2018 and Trump is not expected to nominate her for re-election. He has publicly asked her to resign, but she insists she will stay to see out her term.

On the back of the rate rise, the US dollar has strengthened and the spot price of gold fallen more than $34 an ounce to $1,125. In October, the price was more than $1,304 an ounce.

After the hike, the US dollar also soared to a 13-year high against the Euro, standing just above 1:1 parity, while the Pound also rose against the euro and held ground against the dollar.

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