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Fed raises interest rate, cuts growth forecasts

US equities fell as the US central bank stuck to its monetary policy tightening and raised interest rates for the fourth time this year.

US shutdown takes its toll

Stock markets sold off sharply and the Dollar weakened against its peers minutes after the Federal Reserve (Fed) raised the benchmark interest rate by one-quarter of a percentage point to the 2.25–2.5 per cent range.

However, the forward guidance surprised investors. The Fed cut its forecast of three rate rises in 2019 to two and lowered its growth projections for next year by 0.2 per cent.

The European Union yesterday, 19 December applied more pressure on the British government to approve its Brexit deal, having ruled out any prospect of renegotiating the Brexit withdrawal agreement. The Irish government has begun prioritising its no-deal Brexit plans, showing that both sides of the border are losing hope that a deal will be agreed.

With the UK Parliament standing for recess today until 7 January 2019, it is unlikely that investors and UK businesses will get any clarity on what to expect in the first quarter of next year.

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