Federal Reserve raises rates as expected

Doubts over whether US reflation boost will lift S'pore banks

The rate hike was the central bank's third in the last 15 months and part of the central bank's previously stated plan to boost the rate three times in 2017. Some economists had expected Fed policymakers to modestly step up the pace.

Local housing loan rates are expected to rise this year, say experts.

"The simple message is - the economy is doing well". Trump has also said the Fed's low-rate policy had propped up a "very false economy", and that low rates had hurt hurt savers by giving them minimal returns on their savings.

The raise has been widely expected as Fed officials have made a series of comments strongly hinting at a hike in recent weeks. And while the unemployment rate is low, that is partly because millions of Americans have left the labour market altogether after giving up hope of ever finding work. "And, most importantly, no durable and significant acceleration of wage growth to healthy levels has happened yet".

Typically, the Fed raises rates in order to slow down inflation, even at the risk of choking off some economic activity.

Sun said that Taiwan's inflation remains in check, so that it is unnecessary for the central bank to raise interest rates at present. Now, it's on a roll.

The Fed raised its benchmark lending rate a quarter point and continued to project two more increases this year. "The median projection for the federal funds rate is 1.4% at the end of this year, 2.1% at the end of next year, and 3% at the end of 2019".

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Meantime, the core price index for personal consumption expenditure (PCE), the Fed's preferred indicator for gauging core inflation excluding food and energy, increased 1.7 percent in January from a year ago, moving toward the central bank's target of 2 percent.

Although inflation is "close" to the Fed's 2% target, it noted that goal was "symmetric", indicating a possible willingness to allow prices to rise at a slightly faster pace. But for the first time since the crash we are now looking at a steady upward move in USA short-term interest rates.

The Fed also upgraded its view of business investment, saying it "appears to have firmed somewhat".

It may speed up if the economy accelerates because of possible tax cuts, looser regulations and infrastructure spending from U.S. President Donald Trump and a Republican-controlled Congress.

Policy makers stuck to their previous outlook that there would be two more hikes this year.

The Standard & Poor's 500 index rose 8 points, or 0.4 percent, to 2,373. The Dow Jones industrial average was up about 84.1 points trading at 20,921.47 points after the Fed's announcement.



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