US Fed raises rates, provokes caution in Indian markets

19 June, 2017, 13:20 | Author: Leticia Walters
  • How Fed hike will affect US consumers and overseas economies

While the territory effectively imports U.S. monetary policy due to its currency peg, local banks have been reluctant to pass on higher rates to customers amid fierce competition for mortgages - heightening a property boom, as well as fueling depreciation in the Hong Kong dollar.

Earlier Wednesday, the Federal Reserve's policy-setting group, the Federal Open Market Committee, offered more details on its plan to start reducing its monthly reinvestments of maturing Treasuries and mortgage-backed securities.

The dollar nursed losses on Thursday, after weak U.S. inflation data left investors wondering if the Federal Reserve would be able to follow up its latest rate hike with another later this year.

The US Dollar edged higher as investors pin their collective hopes on another rate increase from the Federal Reserve.

This evening the Central Bureau of Statistics will publish Israel's Consumer Price Index for May with economists expecting that it rose 0.3% over the month.

The statement also said inflation "has declined recently" and in the next 12 months "is expected to remain somewhat below 2 per cent in the near term". Annual inflation is running at 1.7 percent.

Gold futures slumped Thursday, building on a retreat that started Wednesday afternoon as the Federal Reserve raised interest rates and sounded determined to hike again this year. The market-based measure of inflation compensation low. "The drop in crude oil prices and the corresponding unloading of energy shares in the region, meanwhile, seems to be the primary drag on regional bourses", Jingyi Pan of IG said in a commentary. During the recession, the Fed purchased $4.3 trillion worth of financial products in a complex bid to further boost growth by cutting long-term rates. That spurred selling of real estate developers' shares.

The FED rate is one of the most effective and at the same time unsafe levers for raising the American economy.

Greek government bond yields remained steady on Thursday ahead of a key Eurogroup meeting later. Investors were also awaiting the latest rate decision by the Bank of England due at noon in London. Dow Jones Industrial Average touched its all-time high on Wednesday. Home Depot and Goldman Sachs contributed most of the blue-chip index's gain. USA employers continue to add jobs at a steady rate. Benchmark U.S. crude fell another 22 cents to $44.51 a barrel in electronic trading on the New York Mercantile Exchange.

The pan-European FTSEurofirst 300 index ended down 0.3 percent and MSCI's gauge of stocks across the globe fell 0.8 percent. Brent crude, used to price worldwide oils, edged 1 cent higher to $47.01 a barrel.

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