The US Central Bank, the Fed has raised its key interest rate, as experts expected. The target range for the Federal funds rate Federal Funds Rate increases by 0.25 points to 2.25 to 2.50 percent, said the Fed in Washington. To be able to this is the interest rate banks lend to each other overnight money. It is in view of the booming economy, already the fourth increase this year.
analysts had expected the rate hike, if it had been up to the last residual doubts. It is the overall ninth increase since the start of interest rate tightening by the end of 2015. At that time, the interest rate had amounted to only 0.25 percent.
U.S. President Donald Trump had warned the Fed, however, repeated before raising interest rates. He fears that higher interest rates could put an end to the economic boom in the United States. In a Tweet increased Trump the pressure on Fed Chairman Jerome Powell in front of the decision. Trump warned, to decide on the raising of interest rates. The Central banker should not make “another mistake”.
I hope the people over at the Fed wants to read yesterday’s Wall Street Journal Editorial before they make yet another mistake. So, dont let the market become any more illiquid than it already is. Stop with the 50 Bs. Feel the market, dont just go by meaningless numbers. Good luck!
— Donald J. Trump (@realDonaldTrump) 18. December 2018,
The Central Bank itself emphasized before and after the interest rate increase their independence and insured that political pressure played no role in their decisions. “Nothing will dissuade the Fed from its course, if we think that it is the right way,” said Central Bank chief Powell to the decision.
growth forecast down
corrected at the same time, the Fed announced that the interest rate in 2019 to only twice a raise. In September, the Central Bank had signaled for three more increases. Thus, the interest rate is expected to rise until the end of next year, to 2.75 to 3 percent. Originally, he was supposed to reach mid-2019 to three per cent. The brand is considered “neutral” territory, neither too high nor too low.
Powell had recently stressed the Fed was nearing a level of interest rates, the economy slowed and neither pushed. Therefore, a cautious Approach was advisable.
Also for the economic growth, the Fed is a little less confident in The growth forecast for the current year was reduced slightly by 0.1 points to 3.0 percent. In the coming year, the Fed now expects the world’s largest economy to grow by 2.3 per cent. In the past, the expectation had amounted to 2.5 per cent. Also, Inflation is not expected for this and the coming year a little weaker.
stock prices plummeted again
The Fed has seen since September, signs of a tightening of the economy, said Powell. The stock market also provides a weakening economy: The Dow Jones fell on Monday to its lowest level since April, before recovering on Monday.
The prospect of a less steep interest rate path has not reached out to the investors on Wall Street, apparently, because after the interest rate increase the rate again plummeted: The Dow Jones Industrial fell by 1,49 percent to 23 323,66 points. In the meantime, the Index had slipped even to the lowest level since October last year. The market breadth the S&P 500 index lost 1.54 per cent to 2506,96 points.
The technology-heavy Nasdaq 100 fell with minus 2,29 percent to 6342,96 counter under even more pressure than the Dow. Technology assets are considered to be interest rate sensitive, because they depend strongly on the investments of the company. The corporations need to pay more money for lending interest rates, less investment left.