Singapore market dips after Fed rate increase

Marcus Newton
March 24, 2018

Rising interest rates are typically good for savers, who are likely to receive higher interest on the savings they have in the bank.

The Fed said that the USA economic outlook had strengthened over the past months on expectation for inflation to rise in the coming months, taking the rate close to the Fed's target. Applicants must set up local units, establish payment infrastructure - including disaster recovery systems - and store client information domestically, the central bank said.

Bond yields and stocks initially rose after the Fed's announcement.

Australian shares ended a choppy session slightly lower after data showed hiring for full-time positions surged in February, with 17,500 net new jobs getting added in the month, just under forecasts of 20,000. It rose $1.37, or 2.1 percent, to finish at $67.42 per barrel on Tuesday.

"This decision marks another step in the ongoing process of gradually scaling back monetary policy accommodation - a process that has been under way for several years now", Powell said in opening remarks to reporters that signaled policy continuity with his predecessor, Janet Yellen. This is particularly so in the case of the interbank lending market, which is directly influenced by central banks to affect interest rates across the board.

"In the long term, both may not expand as much as the Fed expects".

The Indonesian rupiah had appreciated 0.14 percent to IDR 13,742 per U.S. dollar by 13:50 pm local Jakarta time (Bloomberg Dollar Index), this is in line with the general trend as the United States dollar is on the defensive after the Federal Reserve turned out to be less hawkish than anticipated.

If the Fed does stick with its new forecast for three rate increases this year and three in 2019, its key policy rate would stand at 3.4 percent after five years of credit tightening.

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"(Gold's) initial reaction to the Fed was positive, but then reading through to 2019 and 2020 you see potentially a faster pace of (rate) tightening, so its like giving with one hand and taking away with the other", ICBC Standard Bank analyst Tom Kendall said.

A portion of the voting membership of the committee rotates every year among the Fed's regional bank presidents.

Mr Powell said some Fed members are anxious about the possibility of a trade war, referencing conversations between central bankers and business leaders.

Jerome Powell, the new Fed chairman, expressed optimism about the current economic picture and said officials were trying to strike a balance between raising rates too slowly or too quickly.

Seoul shares hit seven-week closing high after crude oil prices surged and the Fed policy statement turned out to be less hawkish than expected. The statement described economic activity as rising at a "moderate rate", a slight downgrade from January, when the Fed described the economy as rising at a "solid rate". Fed representatives now utter an upsurge from their former prediction done prior to the Republican tax cuts was concluded.

In the forecasts, USA central bankers projected a median federal funds rate of 2.9% by the end of 2019, implying three rate increases next year, compared with two 2019 moves seen in the last round of forecasts in December.

Those higher estimates may reflect the expected impact of the additional government spending.

Policymakers increased their expectations for economic growth and continued with their projections of total three hikes in 2018.

Other reports by MaliBehiribAe

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