US Fed raises interest rates for third time


NEW YORK, March 15 US stocks added to gains, while Treasury yields fell and the dollar weakened on Wednesday, after the Federal Reserve raised interest rates for the second time in three months but did not flag any plan to accelerate the pace of monetary tightening.

It is only the third time rates have been hiked since the 2008 financial crisis and comes as the world's biggest economy sees steady economic and jobs growth. A broader recovery of commodities spurred the Stoxx Europe 600 Index higher, with miners driving numerous gains. "The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run", it said.

"We continue to expect that the ongoing strength of the economy will warrant gradual increases in the federal funds rate, to achieve and maintain our objectives", Yellen says.

The last rate hike occurred in December, when the Fed moved to raise rates from.5% to.75%.

But, a strong correlation is seen after a week of US Fed meeting, Reuters said in a report.

The rate rise comes after strong jobs figures this week, which saw the United States economy add a better-than-expected 235,000 new positions in February. "Household spending has continued to rise moderately while business fixed investment appears to have firmed somewhat". Last year, the central bank flagged its plans to raise short-term interest rates more aggressively throughout 2017.

Fresh figures also showed a pickup in retail sales in the USA despite delays in tax return payments, holding spending back somewhat.

The change - which was widely expected - increases rates to a range of 0.75% to 1%.

However, the dollar movement is also expected to strengthen after U.S. rates, but it weakened against a basket of currencies soon after the announcement. "Rates will likely continue to slowly rise this year barring a change in the economic situation".

When looking at the more broad spectrum unemployment rate called the "U-6", rate, unemployment is actually somewhere around 9.3 percent. The dollar has been struggling to head to higher highs despite a full market pricing (almost) of a hike in March and three this year. Both prongs of the Fed's price stability and full employment dual mandate have shown strength over the past year: The core personal consumption expenditures index, the Fed's preferred inflation gauge that excludes volatile food and energy prices, registered 1.7% in January, ever closer to the central bank's 2% target.