Global stocks slide amid trade tensions, Fed rate hike

Global stocks slide amid trade tensions, Fed rate hike

Global stocks slide amid trade tensions, Fed rate hike

The Federal Reserve raised interest rates Wednesday by a quarter of a percentage point and signaled that the central bank is on track to raise rates twice more in 2018. While this might seem daunting for the average consumer with debt or mortgages, the increase is actually a sign of continued health and strength in the economy. It had risen as high as 2.93 percent as investors expected quicker gains in interest rates. Job gains have been strong in recent months, and the unemployment rate has stayed low. And with the American economy projected to grow at a fairly healthy clip amid quickening inflation, the increases in the Fed's discount rate are expected to gather pace over the next two years.

This is the fourth time the Fed-which is the central bank of the US -has raised interest rates since 2017, and it's the sixth time since the financial crisis, which began in 2008. The Fed tightened policy three times previous year.

But consider that approximately $62.50 a year has already been added as a result of the Fed's five rate hikes since late 2015, and interest payments may be up by $100 at the end of the year.

The Fed, as expected, raised its key lending rate, citing the improved United States growth and employment outlook.

Additionally, based on the updated economic projections, Fed expects inflation to be at 1.9% this year, near about its target of 2%.

The currency, long in the spotlight after if its run-up against the greenback over the past year, appreciated to 31.16 to the dollar on yesterday's opening, while shares on the Stock Exchange of Thailand (SET) Index reached as high as 1,812.89 points in early trading before a late-afternoon descent below 1,800.

President Donald Trump recently announced steep tariffs on aluminum and steel and is expected to take more tough action against Chinese goods this week, but Powell said officials did not specify whether rising trade frictions could impact growth or inflation.

The short-term bias is turning bearish for the dollar index.

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"The market will have to get to know Jerome Powell a little bit and will have to test his credibility as Fed chairman", he said.

In the FOMC's statement, the U.S. central bank made no change to the three hikes they expect for this year but added one more hike to the dot plot in 2019.

At the same time, it increased its estimate for rate hikes in 2019 from two to three, reflecting more optimistic expectations for growth and low unemployment. Officials raised their median estimates for economic growth this year to 2.7 percent, up from 2.5 percent in December.

The US treasury yield curved spiked initially but later dipped lower than the levels before the Fed announcement.

Likewise, Tim Foster, fixed income portfolio manager, Fidelity International said the focus was also on the dots plot and Fed's updated economic projections. That's the case right now, but with an important difference: the economy has been growing for nearly a decade, and interest rates have been historically low for the whole time.

USA gold futures for April delivery rose 0.7 percent to $1,331 per ounce.

Following Wednesday's move by the Federal Reserve, the effective federal funds rate weighs in at roughly 1.63%, the loftiest such going rate dating back to September 2008, during the height of the global financial recession.

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