The United States Federal Reserve has raised interest rates and outlined plans to reduce its enormous balance sheets as policymakers pointed out an expected rate hike that is supposed to happen again before 2017 ends. In addition to this, policy makers have raised the Federal Funds target ranger to between 1pc and 1.25pc on Wednesday, which is approximately up from 0.75pc to 1pc.
As the tightening clearly represents the second hike rate this year, this is just the fourth increase since the financial crisis, when policymakers pushed rates down to zero. However, the Federal Reserve’s decision to tighten policy also contradicts with the Bank of England, which cut rates last August (2016) in the wake of the Brexit vote and is expected to uphold minimal rates at record low of 0.25pc.
In accordance to this, United States officials maintained a projection of one more rate hike in 2017 amid slightly stronger growth projections and downward revisions to its unemployment forecast after the jobless rate fell to a 16-year low in May.
However, a report on July 7, 2017 showed an unanticipated bigger job increase in the United States that kept the Federal Reserve on track and made the Fed suggested another interest rate hike later this year. The data shown on Friday presented U.S. non-farm payrolls which advances for up to 222,000 last June, the data also indicated employers increasing hours for employees. On the other hand, after being reviewed, the data for the month of April and May showed 47,000 created jobs which were a bit higher than previously reported.
This report suggested the Federal Reserve to keep its trimming plans for the rest of the year, and encourages another rate hike this 2017. Charlie Ripley, investment strategist at Allianz Investment Management in Minneapolis said in an interview on Friday that the U.S. job report will increase the Fed’s resolution to begin its balance sheet reduction sooner than later, and that the solid employment data should keep the Fed stabilized.