Stop the world!! The US raises interest rates!

[scooterscot]

mad

We're doomed! Save yourselves!!

US Fed raises interest rates by 0.25% - BBC News

US Fed raises interest rates by 0.25%

Breaking News image
US Federal Reserve raises interest rates by 0.25%, a move with potential global repercussions.

The move takes the range of rates banks offer to lend to each other overnight - the Federal Funds rate - to between 0.25% and 0.5%.

The US central bank also raised its projection for economic growth next year slightly, from 2.3% to 2.4%.

That suggests the bank does not think the rate increase will damage growth. US share markets jumped in response.

The Dow Jones went from a 50 point rise to stand up 79 points at 17,612.79, a 0.5% gain.

The rise is the first move upwards since 2006. Rates in the US have been at near-zero since 2008.

When the Fed last raised rates#The CBI has commented on the US Federal Reserve's decision to raise interest rates by 0.25%.

The UK business lobby group, the CBI, said the move was unlikely to mean swifter action from the Bank of England on interest rate levels in the UK.

Rain Newton-Smith, the CBI 's director of economics, said: "Alongside the US, the UK has been one of the best performing advanced economies in recent years, but the Bank of England probably still has a way to go before rising inflationary pressures at home persuade it to follow and up interest rates."

[Zero Liability]

Just means they'll target a range between 0.25 and 0.5%. Doesn't mean they'll actually hit it. Token increase, though.

[BrilloPad]

Interest rate rise means all is fine. Financial crisis averted. We are saved.

[tomtomagain]

Which of these statements are true:


Banks to immediately pass on rise to their mortgage holders.

Banks to immediately pass on rise to their savers.

[jamesbrown]

Just means they'll target a range between 0.25 and 0.5%. Doesn't mean they'll actually hit it. Token increase, though.

This is an interesting point and definitely something to watch. Target is the keyword. It makes sense that they can do this by increasing the overnight reverse repo and interest on excess reserves, but who really knows. For one, this is transmitted through traditional banks that park their money with the Fed. The issue is that QE has scuppered the traditional mechanisms and, even with the old mechanisms, there were bumps in transmission (especially during the crisis).

[SueEllen]

Which of these statements are true:


Banks to immediately pass on full rise to their mortgage holders.

Banks to immediately pass on full rise to their savers.

I think you find...

[jamesbrown]

Yeah, all banks immediately increased their prime rates but left deposit rates untouched Awash with cash.

[Zero Liability]

If they still needed deposits to extend credit, they might have had an incentive to push up rates, but they really don't need them that much anymore, with central banks to provide the 'reserves'. So there is very limited incentive to increase rates paid on savings accounts.

This is an interesting point and definitely something to watch. Target is the keyword. It makes sense that they can do this by increasing the overnight reverse repo and interest on excess reserves, but who really knows. For one, this is transmitted through traditional banks that park their money with the Fed. The issue is that QE has scuppered the traditional mechanisms and, even with the old mechanisms, there were bumps in transmission (especially during the crisis).

Yup, although I would hesitate to use the word "market" in conjunction with anything the Fed does, it is essentially a very opaque auction process. Targeting a range between 0.25 and 0.5% is hardly going to give them much leeway when another "liquidity crisis" hits, so we'll no doubt see Japan style QE if and when that happens.

[AtW]

Just means they'll target a range between 0.25 and 0.5%. Doesn't mean they'll actually hit it. Token increase, though.

Token?

US Fed rates go up 50%!!!!

[AtW]

Which of these statements are true:


Banks to immediately pass on rise to their mortgage holders.

Banks to immediately pass on rise to their savers.

Neither.

Correct one is - Bankers to immediately increase their own bonuses.

HTH