US Fed raises a key rate, signals third hike later

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The Bank of England made a decision to leave the record low interest rate unchanged, in a split vote, as more policymakers sought a rate hike.

The average 30-year fixed mortgage had a rate of 4.02% on Weds., June 14 - the lowest since November 16, 2016 - and an average of 0.24 discount and origination points. The major indices in the Indian markets are trading fairly higher and it seems rate hike by Fed has not had much of an impact on the Indian bourses.

Since the financial crisis as the Fed has bought government and mortgage-backed bonds to underpin the American economy, but policymakers have confirmed that they will start to reduce reinvesment of bonds as they mature. The Hang Seng in Hong Kong dropped 1.0 percent to 25,621.26 and Shanghai's Composite index edged 0.1 percent lower to 3,128.21. However, the Fed says it would start reducing its holdings of bonds and other securities in this year, which is a sign of its confidence in USA economy's growth and strengthening job market.

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By contrast, the European Central Bank last week poured water over expectations that it would start to roll back its own huge money-printing programme or raise interest rates in the near future. This is thought to tighten financial conditions, providing the Fed with less scope for rate hikes in 2018.

The overall hawkish tone of the central bank's updated policy statement and a question-and-answer session on Wednesday following its decision was read by some as underscoring the Fed's desire to normalize monetary policy, despite sluggish inflation.

On top of the rate increase, the FOMC said it will begin the process this year of reducing its balance sheet, which it expanded by buying bonds and other securities in order to fight the housing crisis. Neel Kashkari dissented the rate hike.

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The interest rates have been raised by the Federal Reserve on Wednesday. The S&P and NASDAQ both fell after the announcement, and the Dow shuddered before recovering later in the day.

In a vote of confidence for the US economy, the US Federal Reserve has agreed to raise its key rate by 0.25 percent to a new target ranged between one and 1.25 percent.

In currency markets, the dollar is up to 110.22 yen from Tuesday's 110.04 yen.

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