Home » Currency Note » Currency Note » Fed hikes interest rates to 2.25%

As expected, the Federal Reserve hiked interest rates to 2.25% yesterday. The markets had priced in the increase, which is the third such rate rise this year. The real focus of attention was on the Fed’s ‘dot plot’, which shows where policymakers believe interest rates are going to go in future months. There has been continued speculation that there could be a fourth hike in December and investors waited to see whether the ‘dot plot’ supported this belief.

It did. 12 of 16 officials are in favour of four rate hikes this year, which makes another rate rise in December likely. Of course, there is still time for this to change but as it stands, it does appear that there will be another hike before the year is out. The dollar weakened immediately following the announcement, but has quickly retraced that and has begun this morning by climbing higher against the pound and euro.

In Brexit-related news, the Chartered Institute of Procurement and Supply (CIPS) has said that a failure to reach a deal with Brussels before the Brexit deadline could lead to massive queues at British borders. In a survey of 1,300 UK and EU-based supply chain managers, CIPS found that customs delays of just 30 minutes could bankrupt one in ten firms. The survey also found that almost 25% of British businesses are planning to stockpile goods to counter the possibility of shortages in the future.

If you’re concerned about losing money to exchange rates – and you should be, given the recent volatility – do have a talk to your Personal Trader about how a forward contract can lock in your exchange rate for up to a year. Simply give them a ring on 020 7898 0541.

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