US Fed raise interest rate by 0.25% - NZDUSD lower

The US Federal Reserve Open Market Committee (FOMC) has just announced the Fed Funds interest rates will be increased by 0.25% - this was widely signalled and expected.

The key points from this meeting include:

· Fed raises target interest rate to 0.50-0.75%, sees 3 rate hikes in 2017

· Fed sees faster path of future interest rate hikes, raises estimated long-term federal funds rate to 3.0% from 2.9%

· Fed sees slightly faster pace of GDP growth and slightly lower unemployment rate next year compared with prior forecast

· Fed vote in favour of policy statement was unanimous

· Fed says stance of monetary policy remains accommodative

· Fed repeats near-term risks to the economy appear "Roughly balanced"

· Fed says inflation has increased since earlier this year; economic activity has been expanding at a moderate pace

· Fed says market-based measures of inflation compensation have moved up "Considerably" but still are low

· Fed repeats expects economic conditions will evolve in way that warrants "Only gradual increases" in fed funds rate

The key point in the above is the Fed seeing 3 rate hikes in 2017 – they previously only saw 2.

Fed Chair Janet Yellen will be holding a press conference and Q&A session in 10 minutes.

The NZDUSD is lower in immediate response as the USD strengthened across the board.

Current indicative levels are:

NZDUSD 0.7145 / 0.7170
NZDEUR 0.6755 / 0.6780
NZDGBP 0.5655 / 0.5680
NZDJPY 83.05 / 83.30
NZDAUD 0.9585 / 0.9610
NZDCAD 0.9455 / 0.9480

© Scoop Media