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Exchange rates stable despite Fed rate hikes

19 June 2017

The Federal Reserve's decision on Wednesday to raise interest rates by 25 basis points was widely anticipated, but markets were surprised by the hawkishness in the policy statement and Chair Janet Yellen's press conference.

USA stocks opened lower Thursday as investors continued to digest the Federal Reserve's decision to raise interest rates by a quarter point.

Exchange rates remain stable after Fed rate hikes on Wednesday.

"Because the Korean market rate has been rising, the possibility of a rapid capital outflow due to Fed's rate increase, is deemed low; Korean policy rates were lower than U.S. between August 2005 and September 2007, but Korea survived". That rate is closely tied to interest rates on mortgages and other kinds of loans.

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Bloomberg poll revealed that only 5 of 100 economists surveyed expected the FED to maintain the interest rate in the prior range of 0.75-1 percent.

(Korean ) "Now it's certain that the BOK will not lower the key interest rate which means it will stay unchanged or inch up from the current rate". These were mostly purchased in 2007-2009 financial crisis and recession. Some gains are expected on Wall Street later, with the futures for both the Dow and S&P 500 up 0.1 percent. They estimated that there was a 95% chance the central bank would increase rates following its meeting of two-days that ended Wednesday. The fall in energy resources, leads to a drop in the economy of those countries, incomes of which depend on energy revenues.

Mortgage rates were little changed this week, as the benchmark 30-year fixed mortgage rate inched lower and remains at the lowest level in seven months according to Bankrate.com's weekly national survey.

Even though eurozone growth has been improving, the European Central Bank appeared reluctant to reduce monetary support for the economy, which includes pumping billions of euros into bloc each month.

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Leaders at the Fed see unemployment remaining close to 4.3% for the remainder of 2017 and dropping in 2018 to 4.2%. Softening commodity prices did little bolster arguments that inflation will pick up the pace, even as the US labor market remains on strong footing - raising the specter that central bank officials made a policy error.

They forecast US economic growth of 2.2% in Y 2017, an increase from the previous projection in March.

Overall, growth has been slow and steady in the USA since 2009, making it one of the country's longest growth periods in history. It is bloated with the huge number of USA government bonds, or treasuries, and mortgage-backed bonds it bought in the years after the 2008 financial crisis in order to lower long-term interest rates and pump prime the economy with cash.

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