up to 0.25 points on the basis of a mejorpanorama economic and the almost full employment
WASHINGTON-The Federal Reserve of the united States rose on Wednesday in a quarter of a percentage point the interest rate of short-term and expects to do so in a manner more rapid than projected during the next year before the signs of a low unemployment, inflation on the rise, and a rebound in economic growth.
“Our decision to raise rates should certainly be understood as a reflection of the confidence that we have in the progress that has made the economy” and is expected to continue, said the president of the central bank, Janet Yellen, during a press conference in Washington.
The entity indicated that the federal funds rate, the reference rate, will increase by a quarter of a percentage point to be between 0.5% and 0.75%, a decision that also raises the cost of funding both for people and for companies.
The Fed highlighted that currency a brighter outlook for the economy and anticipates an increase of 0.75 percentage points in 2017, probably in three increments of a quarter of a point each. It is a pace faster than the two hikes mentioned in September for the next year, a change of mind in which they have affected factors such as unemployment, which has just come to sui lowest level in nine years, and the possibility that the government of president-elect, Donald Trump resorted to fiscal stimulus, through tax cuts and spending increases, to prop up the economy, ” said Yellen.
The following steps of the Fed will depend on several factors.
the triumph of The republican candidate in the November elections has fueled market expectations that the tax reform, which outlined and promises of spending that did could stimulate both growth and inflation.
The Fed’s decision also consolidates the separation of the trajectory of the us economy from the rest of the major economies of the world.
This year, the European Central Bank and the Bank of Japan, as well as the central banks of Brazil, South Korea and India, have reduced rates of interest. Some entities even have left on negative territory in an effort to speed up inflation and growth.
The central bank u.s. it noted in a statement released after a two-day meeting that upward of a quarter of a point took place “in the light of labour market conditions and inflation, both occurred as planned”, a signal that estimates that the economy is very close to or already reached the full employment, the lowest level that can reach the unemployment without unleashing inflationary pressures.
The Fed continues to expect rate increases “gradual,” stressed the statement, although projections showed that the officials of the agency saw a rise faster in 2017 than before.
The central bank is forecasting that the federal funds rate is located at 1.4% by the end of 2017, and 2.1% by the end of 2018, and 2.9% for the same date of 2019, according to forecasts of 17 staff. This rhythm involves three increases of a quarter point per year over the next three years, or nine hikes in total. In the projection of September, however, the central bank addressed two increases during the coming year.
The agency stressed in its message, the strength of employment and reiterated its position that “the risks of short-term economic perspectives are more or less in balance.” He added that closely monitors the indicators of inflation as well as the events of the global economy and financial markets.
The announcement, which was widely expected, was not welcomed by the markets. The Dow Jones Industrial Average, which approached to overcome the barrier of 20,000 points, he ended up falling down 119 units, or 0.6%, to be in 19.792,53, in its worst day since October. Some analysts cautioned that the increases faster than the interest rates may threaten the bullish run of the market, which has been driven by the expansionary policies of the central bank. The indicator Standard & Poor’s 500 and the Nasdaq Composite Index closed with flashbacks of 0.8% and 0.5%, respectively.
“For now, interest rates are good,” says James Bianco, president of Bianco Research LLC. “When you go up to 3%, however, it starts to hurt, and that is what is making the market think twice”, he says.
The dollar, however, strengthened since rising rates increase their appeal to investors seeking a higher return. The WSJ Dollar Index, which measures the performance of the currency green against 16 currencies, jumped 1% on Wednesday. The yields on us Treasury bonds also increased, reflecting a fall of their prices, which move in the opposite direction. The bond yield of the 10-year Treasury reached 2,523%, its highest level since September of 2014.
The central bank believes the u.s. economy is robust enough to take a new step in the way of increases in rates that began a year ago and leave behind the policies of credit ultrabarato.
The agency raised the federal funds rate a quarter point in December last year, after keeping it at near zero for seven years in the U.S. experienced a financial crisis, a recession and a recovery faltering.
The fee increase went into effect Thursday. The central bank also increased the rate it charges for emergency loans, what is known as the discount window, in a quarter of a percentage point to leave it at 1.25%.
The low interest rates have been “very good” for the business, recognizes Eduard Van Loenen, president of the home mortgage loan First Portland Mortgage Corp., of Portland, Maine. “We’ve had a nice trip, probably from the early 90′s”, he says.
-Riva Gold and Aaron Kuriloff contributed to this article.
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