Fed raises rates amid improved USA economic outlook

Fed raises rates amid improved USA economic outlook

Fed raises rates amid improved USA economic outlook

March 15 USA stock index futures were slightly higher on Wednesday as investors focused on a Federal Reserve meeting, where the central bank is widely expected to raise interest rates for the second time in three months.

A Global News analysis noted that the impact of the hike should be seen through the lens of Canada's key interest rate, which has remained static at 0.5 per cent since July 2015.

In the previous quarterly meeting held in late December, the central bank maintained its interest rates, with the discount rate unchanged at 1.375 percent for the second consecutive quarter.

But she dismissed the possibility interest rate hikes might put Yellen at odds with Trump and his efforts to boost growth.

"We saw the Federal Reserve move - the era of low interest rates is over".

Fresh figures also showed a pickup in retail sales in the U.S. despite delays in tax return payments, holding spending back somewhat.

The FOMC [Federal Open Market Committee - the Fed's rate setting board] also gave little indication of how it views US President Donald Trump's economic policies, and what that might mean for the US economy.

The US economy may turn out to be stronger than expected, leaving the Fed playing catch-up, he said.

The central bank's policymakers are still forecasting three rate hikes this year, including the one announced Wednesday.

The bank has sought to increase interest rates from the historic lows implemented following the Great Recession.

On the other hand, the price index for personal consumption expenditures reached 1.9 percent in January, which marks its fastest annual pace in more than four years, just shy of the Fed's 2 percent target. Chairwoman Yellen added that the additional word reflected the Fed's belief that the inflation rate of 2% could, at any given point, move above or below the 2% target, and as such, they would have a symmetric move to realign the inflation rate to 2%.

Asian equities followed US stocks higher, after Treasuries rallied and the dollar tumbled as the Federal Reserve raised interest rates without accelerating its timeline for future tightening.

Business owners, homebuilders, consumers and investors have all expressed more optimism about the US economy since election day, even as President Donald Trump's controversial policy proposals have polarized many Americans.

A 30-year fixed rate mortgage averages 4.21 percent, according to FreddiMac.com.

Not everyone was pleased with the decision to hike rates, saying the economy is not as strong as the Fed makes it out to be and that while employment is stable, wages have been stagnant.

Domestically, local financial markets will be looking to Thursday's release of December quarter GDP data, which is expected to show the economy grew by 0.7 per cent over the quarter.

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