FTSE LIVE: Shares on the slide after US Fed raises rates

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Michael Hewson, chief market analyst at CMC Markets UK –

‘Last night the Federal Reserve raised rate interest rates, for the fourth time in the last 12 months pushing the Fed funds rate up 25 basis points to 1.5% to 1.75%. This was a widely anticipated move and no surprise, with investors much more interested in the Fed’s forecasts for the economic outlook, as well as their expectations for further rate rises.

‘There had been an expectation that the central bank would signal its intent for a higher pace for rate rises in 2018, however this always seemed optimistic, with policymakers keeping the prospect of three rate rises intact for this year, while upgrading the prospects for 2019 from two to three increases.  The Fed also upgraded the growth outlook for this year and next.

‘At this press conference the new Fed chief cut an optimistic figure about the US economy, however the statement did suggest that the Fed did have some concerns with a slight tweak to the language which downgraded the description of economic activity from “solid” to “moderate”

‘This seems entirely sensible in light of recent data on the consumer side which has seen retail sales decline for three months in succession.

‘Despite this fairly upbeat tone US markets finished the day lower probably more as a result of the announcement earlier that the US would outline a series of tariffs later this week aimed at cracking down on Chinese theft of intellectual property, in what could be the opening shots of a new front on the current battles on trade policy.

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