The US Federal Open market Committee chose to raise the interest rate for the fourth time in 2018, taking the rate up to 2.5%. This was then preceded by a sell-off in the stock market with US Stocks falling to 2018 lows essentially giving up most of the gains we have seen throughout the year.
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President Donald Trump had taken the unprecedented step of interfering with the independent Federal Reserve suggesting they shouldn’t increase the rate earlier this month however his concerns were ignored. Consumers in the US have now seen any borrowing repayments increase by at least 1%. Following Donald Trump’s tax reform any extra spending for businesses and consumers may have received is likely to now be swallowed up by increased repayments on non-fixed borrowing.
The markets did not receive the news well especially as the Federal Reserve have said they will look to increase the rates twice more next year. The changes from the central bank have pushed forecasts for growth down from 2.5% to 2.3%.
The tightening of monetary policy in the US may have an effect on the economy, however it arguably may only act to further strengthen the US Dollar. In the western world the US offers considerably greater returns from interest than any other economy and investors may be inclined to keep funds as US Dollars increasing the value.
The latest Gross Domestic Product data for quarter three will be released tomorrow and is expected to remain at the 3.5% level. This will be accompanied by Durable Goods Orders which saw a sharp fall last month, however there is expected to be a rebound of orders up 1.4%.
US data this year has been continuously impressive following a real surge in the US economy. However with the changes taking place towards the end of year from the Federal Reserve the growth is expected to slow to a steadier pace in 2019. Therefore if you’re looking to complete a transfer in the near future discuss your options with your trader.
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