- Markets Insider
The dollar tumbled after the Federal Reserve announced Wednesday that it raised its benchmark interest rate.
The US dollar index was down by 0.8% at 100.89 around 2:18 p.m. ET.
The Federal Open Markets Committee raised the benchmark federal funds rate by 25 basis points to a range of 0.75%-1%, marking its third increase since the Great Recession. This hike will eventually trickle down to increase borrowing costs for short-term loans and credit cards.
Virtually everyonehad been expecting this outcome. In fact, the World Interest Rate probability data provided by Bloomberg hadtraders seeing a 100% chance of a hike.
The FOMC projectedtwo more rate hikesthis year, unchanged from its prior estimate of three in 2017. Only one member of the FOMC – the Minneapolis Fed’s Neel Kashkari – voted against a rate hike.
As for the rest of the world, here’s the scoreboard as of 8:47 a.m. ET:
- The British pound is up by 0.9% at 1.2260 against the dollar. Earlier, data released by the Office for National Statistics showed that the headline unemployment rate fell to 4.7%, a level last seen in the summer of 1975. However, real wage growth in the UK is slowing: regular pay rose by just 0.8% – the lowest rate since October 2014. The euro is higher by 0.7% at 1.0675 against the dollar as Europe gears up for the first of numerous important elections this year: the Dutch elections. The country’s political landscape is fragmented, with over 28 parties in these elections, meaning that a coalition between two or more parties would be needed to form a majority government. Recent polls suggest that Geert Wilder’s populist party has dipped in popularity, but even if his party were to win the popular vote, it is unlikely that he would become the next prime minister given that many of his rivals have ruled out forming a coalition with the PVV. The South African rand is stronger by 1.9% at 12.9089 per dollar after poor retail sales, which fell by 2.3% year-over-year in January, compared to forecasts of an uptick of 1.2%. “The fall in retail sales in January is disappointing given the improving picture painted by [Tuesday’s] mining and manufacturing figures. Even so, we expect that growth will pick up later in the year as agricultural production rebounds and inflation eases,” John Ashbourne, Africa economist at Capital Economics, wrote. The Russian ruble is up 0.7% at 58.7269 per dollar, while Brent crude oil, the international benchmark, is higher by 1.5% at $51.68 per barrel. The Japanese yen is up by 0.7% at 113.94 per dollar.