Federal Reserve Continues To Normalize Monetary Policy

Federal Reserve Continues To Normalize Monetary Policy

Federal Reserve Continues To Normalize Monetary Policy

The U.S. Federal Reserved raised its short-term interest rates on Wednesday by one quarter of one percent. The Hang Seng in Hong Kong dropped 1.0 percent to 25,621.26 and Shanghai's Composite index edged 0.1 percent lower to 3,128.21.

While the territory effectively imports United States monetary policy due to its currency peg, local banks have been reluctant to pass on higher rates to customers amid fierce competition for mortgages - heightening a property boom, as well as fueling depreciation in the Hong Kong dollar. Yesterday, the Fed hiked rates for the second time this year and hinted at curtailing quantitative easing to reduce the current $4.2 trillion portfolio in Treasury bonds.

United States stocks mostly fell while the dollar cut its losses on Wednesday after the Federal Reserve delivered a widely expected USA interest rate hike.

In her post-meeting press conference, the Federal Reserve's chairperson, Janet Yellen, warned that the Fed could implement its balance sheet unwinding process soon if the economy continues to perform as expected.

CURRENCIES: The dollar rose to 109.75 from 109.57 yen.

An agreement on debt relief is a pre-requisite for the International Monetary Fund to participate in a deal for Greece, which in turn would pave the way for the European Central Bank to involve Greek government debt in its asset purchase scheme.

Finance Minister Kim Dong-yeon brushed off concerns about the U.S. Federal Reserve's move to raise its benchmark interest rate, saying the impact of the Fed's decision on the Korean economy will be limited as the move had been widely expected. Many U.S. stocks will be vulnerable to an ongoing tightening in financial conditions especially those with overstretched valuations. Outside of the labor market, the data flow for the USA - including another soft US core Consumer Price Index (CPI) inflation report this morning - had been surprising on the downside.

Australia's S&P/ASX 200 tumbled 1.13 percent, driven by weakness in its materials and energy sub-indexes, which were down 2.3 percent and 2.31 percent respectively.

Mega-cap tech shares from Alphabet Inc.to Facebook Inc. retreated, as American equities fell to a two-week low.

ENERGY: Oil futures plunged overnight after the USA government said oil supplies shrank only slightly last week while gasoline stockpiles grew. Benchmark U.S. crude fell another 15 cents to $44.58 a barrel in electronic trading on the New York Mercantile Exchange. Brent crude, used to price worldwide oils, fell 6 cents to $46.94 a barrel.

The euro was also unchanged at $1.1217, below a seven-month peak of $1.1296 scaled overnight.

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