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The U.S. Federal Reserve widely expected to increase rates

Reporter: Daniel Ryntjes 丨 CCTV.com

12-14-2016 01:07 BJT

 The U.S. Federal Reserve is widely expected to increase borrowing rates at the end of a two- day meeting in Washington. But the election of Donald Trump has raised new challenges ahead in predicting the path of possible further rate hikes into 2017 and beyond. 

Members of the rate-setting Federal Open Market Committee have signaled that they are likely to raise the cost of borrowing through the Federal Funds Rate by a quarter point at December's meeting. 

The CME Group, the world's largest futures exchange calculates that on the basis of recent financial trading the is 97% chance of a rise in the Federal Funds Rate from its current level of between a quarter and a half percent. That high expectation has already impacted real-world borrowing.

"Mortgage rates in the United States have spiked in the last two weeks and I suspect they have already gone to the level they've gone when the rate increase comes through. The bank lenders have already made that assumption and taken their mortgage rates and moved them up."said Douglas Mcintyre,editor of 24/7 Wall St.

Business optimism has surged following Donald Trump's election victory. With a Republican -controlled Congress to assist him, equity markets are assuming that Trump will?

Reduce business regulations and put together a one trillion dollar infrastructure plan.That increased spending would force the Federal Reserve to continue raising rates in order to control inflationary pressure.

 "If the economy continues to do well I don't see any reason why they wouldn't ramp up another 25 in the next quarter or another 25 in the second quarter if we continue to see an acceleration of activity, especially as long as the equity market is doing very well."said Steve Blitz,chief economist of M Science.

But Donald Trump's unusual leadership style, including his economic protectionism, could also have unforeseen negative impacts.

 "This will be the least predictable early presidency in maybe over a century in the United States. And organizations like the Fed I am sure have quietly put together contingency plans for what might happen early in 2018." said Douglas Mcintyre

For now, the United States is experiencing stronger growth, employment and spending activity.

So businesses and consumers are putting aside some of their doubts, leaving us with the strong likelihood of higher dollar borrowing costs heading into 2017.

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