Dow plunges 367 points

23 Dec 2015 | Author: | No comments yet »

Fed Hike Aftermath Series.

Contrary to apprehensions stock markets might capitulate following an interest rate hike by the US Federal Reserve, global equity benchmarks were gainers on Thursday after the Fed raised rates by 25 basis points on Wednesday, reports fe Bureau in Mumbai. Most Asian markets rallied more than 1% with the Shanghai Composite, Japan’s Nikkei and benchmark indices from Taiwan and Indonesia leading the charge.

It’s the first time the United States’ central bank has raised rates since 2006 and is a sign that they believe the country is on firmer footing and may see inflation in the future. Market participants have come to the terms that one single hike, though signaling end of loose monetary policy is less important than actual hike path. In our previous series named FED liftoff available http://www.econotimes.com/FED-liftoff-series-%E2%80%93-end-of-series-note-132189#e , we discussed historically path of hike has been more vital for assets, namely equities.

The committee’s indication that the monetary policy stance remains “accommodative” as it looks to achieve its target inflation rate of 2% even as it recognised the strength in US economy allayed fears of steep normalisation in US interest rates which have stayed near zero (0.25%) for nearly seven years. Republication or redistribution of content provided by EconoTimes is expressly prohibited without the prior written consent of EconoTimes, except for personal and non-commercial use. Neither EconoTimes nor its third party suppliers shall be liable for any errors, omissions or delays in content, or for any actions taken in reliance thereon. Long term, it will probably be better for savers, because they will be able to get higher interest on their deposits and be more expensive for borrowers related to auto loans, home loans and credit card debt. The end of the year is always a good time to do a review and make sure you’re on track and incorporate any changes to your goals into your overall plan.

I think the rate is not going to be significant for the housing market unless rates start going up substantially, which our CIO does not expect in the short term. It may actually provide an impetus for people to make a purchase that they’ve been contemplating for some time and move ahead with now that [rates are going up]. To receive business news directly in your inbox each Tuesday and Thursday, sign up for our free e-newsletter, Briefcase, and be sure to join the conversation by commenting below.

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