Federal Reserve raise the US interest rate but advocate caution

23 March 2017

The US Federal Reserve chair, Janet Yellen, yesterday evening announced the first US interest rate rise of 2017. The rise saw the US base rate move up from 0.5% to 0.75%-1%. This signals the first of what is widely expected to be 3 rate hikes in 2017. She did however temper any jubilance in markets by releasing a very cautious message extoling the virtues of vigilance and positive data in today’s uncertain world. It was this cautious tone that caught a predominantly jubilant market off guard. None the less, with the Federal Reserve definitely picking up the pace of increases, markets believe this to be indicative of the world’s largest economy being firmly on the path to economic recovery. Markets have reacted positively to the news with the S&P 500 rallying 0.8% off the back of the news but the dollar failed to strengthen given Yellen’s overly cautious tone. Markets will be looking towards the next set of employment figures out in April as the lead indicator for where the FED goes from here

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