The Federal Reserve has raised interest rates by a quarter-point to a still-low range of zero-point-five percent to zero-point-seven-five percent.
This was a widely expected move… and… it marks just the second time for the U.S. central bank to hike key rates in almost a decade.
With more on this and the market reactions, we have our Ro Aram on the line.
Aram what’s the latest?
Yes Jihye like you said, just a couple of hours ago the benchmark rate was raised to three-quarters-of-a-percent from the previous half-a-percent – only up by a quarter point.
The last increase we saw was a year ago, also in December, from a record low near zero set during the 2008 financial crisis.
Policymakers said the vote was unanimous, citing that the labor market has continued to strengthen and that the U.S. economy has been picking up at a moderate pace.
While inflation has gone up, it’s still below their two percent target.
During a press conference Fed chair Janet Yellen said that by the end of next year, rates could hit one-point-four percent.
It’s expected that there will be three rate hikes next year, rather than just two.
Wall Street stocks are mostly down, but not by much, as many investors expected the hike.
The Dow lost about _____ percent, the S&P fell ______ percent and the NASDAQ dropped _____ percent.
The dollar index, which measures the greenback against a basket of six major currencies, is up about ______ percent.
The U.S. two-year Treasury yield jumped to the highest since 2009.
So Aram, the rate hike will definitely have an impact on the Korean economy. To what extent do you think the Bank of Korea will react to the latest news, especially in that there’s a rate setting session here in Korea later this morning?
That’s right Jihye, the Fed’s move will likely put pressure on Korea’s central bank to also raise rates, especially when household debt in the country is reaching all-time highs.
But a rate hike by the BOK would cause concerns for the real-estate market, as it has seen the rise of house prices slow recently.
Taking this into account some analysts predict the BOK may stay pat on its one-and-a-quarter-percent rate during its policy meeting later today.
On a related note, Finance Minister Yoo Il-ho earlier said that the government will spend almost 70 percent of its 400 trillion won,… roughly 340 billion U.S. dollar… budget earmarked for next year within the first half to cope with uncertainties.
Back to you Jihye.
Visit ‘Arirang News’ Official Pages