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US Federal Open Market Committee Raises Benchmark Fed Fund Rate to 2.25% – 2.50% Range

BY Soko Directory Team · December 20, 2018 09:12 am

US Federal Open Market Committee (FOMC) raised the benchmark fed fund rate by 25bps to 2.25 – 2.50 percent range.

The raising of the benchmark by US Fed comes on the back of a relatively strong labor market (unemployment at 3.0 percent), coupled with strong growth in household spending and business fixed investment as growth tailwinds.

Additionally, inflation remains above the 2.0 percent target level, at 2.2 percent. The US rate normalization is expected to continue, albeit gradually, in 2019, with the Fed forecasting an additional two hikes next year.

The Central Bank of Kenya Monetary Policy Committee (MPC) has previously noted the rate normalization in developed economies as a risk factor.

This is borne by the fact that a rising rate in developed economies heralds foreign outflows in emerging economies.

In addition, the rate hike is expected to bolster the dollar strength thus negatively impacting external debt obligations – estimated 67.30 percent exposure of external debt denominated was in US dollars as at end of June 2018 – and also the variable rate loans which have the USD LIBOR (London Interbank Offered Rate) as the benchmark.

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system. Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

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