March 21 (Lagos) - The US Federal Reserve will conclude its 2 day meet today and most likely announce an increase in benchmark interest rate by 0.25%.
The Fed is expected to take its target range for the Federal Funds rate to 1.5%-1.75%, up 0.25% from the current target range of 1.25%-1.5%. This would bring the effective Fed Funds rate up to around 1.63%, the highest since September 2008.
The US Dollar index strengthened yesterday on speculation there could be 3 more rate hikes this year in the US.
The yields on treasury bills rose across the five year and 10 year tenors. A steep move in bond yields should be closely monitored given that a lot of investors point to 3% (Yield on 10--year US t-bills) as the critical level for equity markets. It is where corporate financing costs start looking expensive and will attract stocks bears to come on board.
The US stock market which is negative now for 2018, could react sharply if the new Chairman of the US Fed talks about raising the rates 3 more times this year after today's hike.
The impact of the interest rate hikes is a potentially stronger Dollar and higher borrowing costs for more Companies.
reporting for easykobo.com on Wednesday, March 21 2018 from Lagos, Nigeria