Since yesterday, traders in the stock exchange market are stuck on their screens. The Federal Reserve on Wednesday elevated US interest rates. According to the Guardian, this rise marks the seventh since 2015 when the central bank resumed raising rates. Central Bank had ceased raising rates since the last recession between December 2007 and June 2009. As stated by the U.S. National Bureau of Economic Research, the recession stretched over eighteen months.
According to reports, this move by the Federal Reserve was actualized after a two-day summit. The Trump administration recently sparked a trade war with its largest trading partners when it decided to impose tariffs on steel and aluminum. Following the impact it would bring as well as the strong US economy, the Fed settled on raising the interest rates during a two-day meeting.
According to the statistics used, the Fed termed the US job market as robust hence swelling its target for the fed-funds rate to a range of 1.75% to 2%. Fed chairman, Jay Powell, said at a press conference that the US executives are disturbed by the weakening trade relations despite the fact that it has no current effects. The rate of unemployment in the US dropped significantly in May to 3.8%. As the Guardian reports, the drop is the lowest level recorded ever since April 2000 and the Second World War.
The Federal Reserve adds that there would be further progress in 2018. However, fed’s decisions on upcoming rises will be factored by the analysis on economic and global developments. Jobs and monthly wages in the US had stagnated as a result of the 2008 economic depression. However, the country currently has a monthly job growth for last 92 consecutive months.
At the same time, price increases have augmented as the US stock market keeps on close to record high returns. During the Fed summit, a report from the labor department announced an increase in the consumer index. Documented as the prevalent annual report gain since Feb 2012, the consumer index rose by 2.8% from the previous year. The Fed is driven by the urge to increase employment while monitoring inflation. However, it reports the possibility and inevitability of raising rates thrice or four times this year.
The tensions between the US, Mexico, the European Union, and Canada over trade continue to intensify. Consequently, the stock markets are concerned about the effects of retaliation on the Trump’s administration levies on steel and aluminum. Towards the end of a G7 summit, the Canadian PM Trudeau and Trump conversation ended on a bad-note. The Trump’s administration is likely to impose tariffs worth over $50bn on Chinese merchandise.