America’s official interest rate has risen for the second time this year, and is now firmly higher than Australia’s.
Overnight, the Federal Reserve lifted the US benchmark lending rate by 0.25 per cent in a widely expected move — to a range between 1.75 and 2 per cent.
In comparison, the Reserve Bank kept Australia’s official cash rate at 1.5 per cent, a record low, for the past 20 months.
Markets at 7:20am (AEST):ASX SPI 200 futures -0.1pc to 6,022, ASX 200 (Wednesday close) -0.5pc at 6,024AUD: 75.77 US cents, 56.63 British pence, 64.25 Euro cents, 83.63 Japanese yen, $NZ1.08US: Dow Jones -0.5pc at 25,201, S&P 500 -0.4pc at 2,776, Nasdaq -0.1pc at 7,696Europe: FTSE flat at 7,704, DAX +0.4pc at 12,890, CAC flat at 5,453, Euro Stoxx 50 +0.1pc at 3,480Commodities: Brent crude +0.8pc at $US76.45/barrel, spot gold +0.3pc at $US1,299.31/ounce, iron ore -0.3pc to $US67.02/tonne Faster rate hikes ahead
What took investors by surprise was the Fed’s projection that it would increase rates twice in the next few months, which was faster than the market had expected.
The US central bank, which finished its two-day meeting on monetary policy overnight, also expects three rate increases next year — a pace unchanged from their previous projection in March.
By lifting rates, the Fed dropped its pledge to keep rates low enough to stimulate the economy “for some time”, which is a shift from its policies used to weather the global financial crisis.
“The economy is doing very well,” Fed chairman Jerome Powell told a press conference.
“Most people who want to find jobs are finding them.
“Unemployment and inflation are low … The overall outlook for growth remains favourable.”
The ongoing economic expansion coupled with solid job