Home ForexFTSE Stocks flat as investors review hawkish Fed hike

Stocks flat as investors review hawkish Fed hike

by Jonathan Adams
Stocks

Stocks in London were little changed in early trade as investors digested a 25 basis points rate hike by the Federal Reserve, as anticipated, but a more hawkish tone than expected.

At 0830 GMT, the FTSE was down just 0.1% to 6,940.20. Meanwhile, oil prices were fairly steady, with West Texas Intermediate down 0.2% to $50.94 (£40.62) a barrel and Brent crude up 0.2% to $54.00 (£43.03).

On Wednesday, the Fed raised the range of its main policy rate to between 0.50% and 0.75% and signalled that more interest rate increases were on the cards for next year than it had at the meeting in September. Rate-setters in Washington were unanimous in their decision to tighten policy.

According to the newly-submitted ‘dot-plot’ graphs of interest rates projections from the Federal Reserve’s board members and regional Fed presidents, the median expectation is for three quarter-point interest rate hikes in the following year, up from two previously.

A further three hikes were projected in 2018, followed by another three in 2019.

Spreadex’s Connor Campbell said: “Raising rates by the expected 0.25%, marking only the second hike in a decade, Janet Yellen struck a hawkish tone on Wednesday despite warning of a ‘cloud of uncertainty’ that will only disperse once Donald Trump has outlined his intentions more fully.

“The Fed chair also got a subtle dig in at one of the President-elect’s most discussed policies, hinting that the proposed infrastructure spend may make little difference to the country’s fairly healthy labour market. Arguably the most important news market-wise is that the central bank now expects three, not the previously stated two, rate hikes in 2017 – likely to combat the incoming Trumpflation – a revision that sent the dollar index to a 14-year high.”

Investors in the UK were also looking ahead to the Bank of England rate announcement at 1200 GMT amid expectations the bank rate will be kept at a historical low of 0.25% and the asset purchases target will be unchanged at £435bn.

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