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Fed raises interest rates to 0.5% and expresses caution in further increases

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Fed raises interest rates to 0.5% and expresses caution in further increases

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The US Federal Reserve has raised interest rates as expected at 0.5%. With regard to further interest rate hikes the Fed Chairman Janet Yellen, however, expressed caution, pointing to the further development of the US economy. Investors were initially disappointed at the FOMC statement and Euro adheres against the US dollar above 1.09.

Further increases in 2016, but with a large question mark

In FOMC protocol possible further steps of 0.25% in 2016 are mentioned, what the market took initially optimistic. In the course of the protocol showed, however, that the Fed Board considered forecasts of the economic development in the United States carefully and with the greatest caution. So was "carefully" also the most used word of Janet Yellen in the subsequent press conference. They repeatedly stressed the importance of developing in the US labor market, which is attributed to at least the same importance as the rise in US inflation. While the Fed expects that the creation of new jobs continues further, the development can be affected by many factors. About inflation showed the Fed confirming that the target of 2 percent will be achieved, but at the same time called for 1.6 percent in 2016.

Overall, no change has been to the past few years in the policies of the US Federal Reserve. Furthermore, it is stressed that all further steps with extreme caution have to happen, and that all influencing factors must be closely monitored to weigh further steps with the utmost care. As a main point for the Fed crystallized out that the increase of inflation must be closely monitored, as the basis for further decisions. Financial experts in a subsequent round of talks at Bloomberg, expressed the opinion that today's interest rate step was taken in order to avoid greater confusion in the financial markets, and the for next rate hike by the Fed we maybe wait for a long time.

Currency market reacted calmly to US interest rate hike

On the foreign exchange market showed composure. Only after the publication of the expected volatility in the USD pairs. The US dollar initially responded with gains that umschlugen before the press conference in losses. But in the course of the dollar turned back into the profit zone. The euro is falling against the USD currently 0.21 percent at 1.0908. The couple can the resistance at 1.09 but not overcome the long term. The British pound against the dollar is losing 0.26 percent and currently hovering around the 1.50 mark. The biggest loss among the major currencies, the Japanese yen is currently. The pair USD / JPY rising 0.48 per cent to date, at 122.27.

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