Doubts cast over Fed ability to raise rates again in 2017

Doubts cast over Fed ability to raise rates again in 2017

Doubts cast over Fed ability to raise rates again in 2017

The top tier fell 48.6 points to 7425.8, a fall of 0.6%, as markets digested the latest rate rise by the US Federal Reserve, which marked the third in six months.

The median estimate of the long-run neutral rate, which is seen as the level of monetary policy that neither boosts nor slows the economy, was unchanged at 3.0%.

On Wednesday, the US Federal Reserve announced a small increase to its key interest rate of 0.25 percent, which raised the central bank's key target rate to a range of 1 percent to 1.25 percent.

While the Fed will continue to reinvest principal payments from its holdings of agency debt and agency mortgage-backed securities and roll over maturing Treasury securities at auction, it plans to gradually reduce its securities holdings by decreasing reinvestments. Only Neel Kashkari, president of the Minneapolis Fed bank, opposed the increase.

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However, this implied "dot plot" liftoff path is not priced in to markets, which expect a fed funds rate of only 1.5% by year-end 2018.

However, Anna Stupnytska, global economist at Fidelity International, said "emerging headwinds" in the United States economy meant a second hike would be unlikely this year.

Economic data expected through the course of the trading session includes the Reserve Bank of Australia's bulletin at 9:30 a.m. HK/SIN and China foreign direct investment numbers for the month of May at 3:00 p.m. Bob Frick, corporate economist at Navy Federal Credit Union, describes this hike as "another step toward normalizing short-term interest rates and to signal that the economy is doing fine".

"The Fed sounded hawkish, willing to look past the weakness in inflation and reiterating the need to normalize policy", said a BofA Merrill Lynch Global Research report after the release. There was only one rate increase in both 2015 and 2016. Despite this, the finance ministry said it will strengthen its monitoring of the nation's financial markets and come up with countermeasures.

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The VND/USD exchange rates saw little changes this morning although the US Federal Reserve (Fed) raised interest rates on Wednesday on the confidence in a growing economy and strengthening job market in the world's biggest economy.

Asian markets fell overnight and European indices following suit, with the Cac 40 in France down almost 1% and Germany's Dax off 0.5%.

People walk near an electronic stock board showing Japan's Nikkei 225 index at a securities firm Thursday, June 15, 2017, in Tokyo.

The tightened monetary policy had a moderate effect on Wall Street, with the Nasdaq Composite and the Dow Jones falling by 0.41% and 0.10% respectively upon market closure.

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CURRENCIES: The dollar edged lower to 109.56 from 109.57 yen.

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