US central bank raises rates

Business Daily Kenya:  The US Federal Reserve has raised its key interest rate by 0.25 per cent, the second increase this year. The central...

Business Daily Kenya: 

FUS Dollar. Photo/Courtesy

The US Federal Reserve has raised its key interest rate by 0.25 per cent, the second increase this year. The central bank voted to raise its key rate target to a range of 1 per cent to 1.25 per cent.

That’s the highest level since 2008, when policymakers cut rates to encourage borrowing and spending after the financial crisis. The bank also said it would begin cutting its bond holdings and other securities this year.

It cited continued US economic growth and job market strength as reasons for raising its benchmark interest rate. “Our decision ... reflects the progress the economy has made and is expected to make,” said Federal Reserve Chair Janet Yellen.

The rise was widely anticipated after a low unemployment rate, but other economic indicators, including inflation, have been weaker. Data on Wednesday showed US consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months.

This has raised questions about the bank’s future course. US stock markets the S&P 500 and the Nasdaq edged down at the close. But the rate increase was already priced into most stocks.

The Federal Reserve policymakers have been grappling with when and how to alter the policies put in place after the 2008 financial crisis to boost economic activity. At the time, they slashed interest rates and bought up US treasuries and mortgage-backed securities to keep rates low. - BBC

The post US central bank raises rates appeared first on Mediamax Network Limited.

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