United States raises rates, but will we see a third hike in 2017?


Global stocks fell Thursday after the U.S. Federal Reserve raised its key interest rate and the Bank of England revealed it was unexpectedly close to hiking its own benchmark rate at its policy meeting.

The Bank also outlined its plan of reducing its balance sheet, which it expanded by buying bonds and other securities in order to tackle the housing crisis leading up to the great United States financial meltdown in 2008.

In a statement it said: "The committee now expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated".

The VND/USD exchange rates saw little changes this morning although the US Federal Reserve (Fed) raised interest rates on Wednesday on the confidence in a growing economy and strengthening job market in the world's biggest economy. The dollar would get strengthened by the Fed's move. The basic idea will be that the Fed will stop reinvesting the principal of securities when they mature.

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In an effort to push long-term rates interest higher, the Fed says it will start shedding the Treasury bonds and mortgage-backed securities it bought up to help stimulate the economy following the financial crisis.

Federal Reserve Board Chairwoman Janet Yellen arrives at a news conference following a meeting of the Federal Open Market Committee June 14, 2017 in Washington, DC. Fed officials previously increased the rate in March to a range of 0.75 to 1 percent. Still, the central bank had signaled to Wall Street it would raise interest rates yesterday, and seemed to have painted itself in a corner.

Several economic indicators in the past few months, including exports and consumer sentiment, have displayed improvement, prompting the bank to push up its forecast for economic growth this year to 2.6 percent.

They forecast US economic growth of 2.2 percent in 2017, an increase from the previous projection in March.

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While the hike was widely expected, some investors said the central bank's tone was more hawkish and that raised concern about the pace of USA economic growth.

A retreat in inflation over the past two months has caused jitters among some Fed officials who fear that the shortfall, if sustained, could alter the pace of future rate hikes. Analysts and investors had had mixed expectations ahead of the Fed, with some expecting a more dovish outlook given the recent weaker economic data, but long term the Fed's outlook is well supported and that is providing support for the greenback.

The US jobless rate fell to a 16-year low last month.

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