Gov't not overly concerned with Fed's rate hike

Fed expected to raise rates today

Even with signs that inflation is on the decline, the USA central bank chose to raise its benchmark interest rate by a quarter percentage point, from one percent to one-and-a-quarter.

The Fed noted that the jobless rate is at a 16-year low, the job market is growing and inflation is low.

Oil prices fell on Wednesday after data showed a build in US crude stocks and OPEC reported a rise in its production despite a pledge to cut output.

Overall, the Fed was "very nonchalant about inflation and kind of brushed it off", said Blake Gwinn, U.S. interest-rates strategist at NatWest Markets. U.S. Federal Reserve on Wednesday raised the benchmark interest rates for the fourth time since December 2015, and unveiled plans to start trimming its balance sheet.

Despite the weak inflation, the central bank continues to see improvement in the economy.

The Fed's decision to raise rates, announced in a statement after its latest policy meeting, was approved 8-1, with Neel Kashkari, head of the Fed's Minneapolis regional bank, dissenting in favour of holding rates unchanged.

One member of the Fed's committee objected to the rate rise.

Fed Chair Janet Yellen stated her view in a press conference that the economy appears strong enough to withstand additional rate hikes, barring new indications of economic weakness.

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Maersk's container line transports about 15 percent of the world's seaborne manufactured trade. Precautionary measures have been taken to ensure continued operations, the company added.

That would be followed by three rate increases in 2018 and three more in 2019, with the key rate at 2.9 per cent by the end of that period.

"It remains to be seen if the Fed can really do both this year - raise rates again, and also begin reducing its balance sheet", he added.

Bond yields didn't move much after the Fed's announcement at 2 p.m. Fed officials project growth of roughly 2 percent in 2017.

The committee signaled that more rises are on the horizon and that it "expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate".

The central bank also confirmed that it will begin later this year to implement a plan to reduce the size of its investment holdings, which were built up to record levels during the financial crisis to help support the economy, especially once interest rates reached zero.

Their forecast for rate hike pace barely changed compared to March's projections. "But this was well within our expectations as the rate hike had already been priced in", said a trader at a foreign bank in Shanghai.

Kourtney Gibson, head of global equity and fixed income at Loop Capital, told CNBC she liked how Yellen took away the rhetoric surrounding inflation.

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