Growth worries push stocks lower, Fed hike lifts dollar

Federal Reserve Raises Interest Rate Slightly

The Federal Open Market Committee also maintained its forecast for one more rate hike this year. The Hang Seng in Hong Kong dropped 1.0 percent to 25,621.26 and Shanghai's Composite index edged 0.1 percent lower to 3,128.21.

"Investors believe that it is going to take the Fed some time to confirm that inflation is strong enough to raise rates again, and in the meantime, the Fed is going to start reducing its balance sheet at a gradual pace", said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings in Tokyo.

Weighing on Treasury yields and bolstering bond prices, the tepid inflation numbers outweighed traders' concerns over the Fed's announced quarter-point rate hike and plans to reduce its balance sheet this year.

They forecast USA economic growth of 2.2 percent in 2017, an increase from the previous projection in March.

HONG KONG: The Hong Kong Monetary Authority raised interest rates after the Fed's move, to help keep the territory's currency at a stable rate against the USA dollar.

Policymakers still expect one more rate hike this year.

More news: India bowl against Pakistan in Champions Trophy final

The hike comes despite several key figures coming in weaker than expected, including inflation, an drop in U.S. consumer prices in May and retail sales, which their biggest drop in 16 months last month.

The Bank also outlined its plan of reducing its balance sheet, which it expanded by buying bonds and other securities in order to tackle the housing crisis leading up to the great USA financial meltdown in 2008. A local expert says the US rate hike could actually help Korea resolve its massive household debt problem, which topped a staggering 1.2-trillion USA dollars in the first quarter. The government has achieved all its goals - unemployment is below 5 percent, inflation is about 2 percent, economic growth is about 1-2 percent.

Stocks fell in Europe and Asia on Thursday as investor concern over the pace of USA economic growth overshadowed a widely telegraphed rise in Federal Reserve interest rates that lifted the dollar off recent lows.

London's FTSE 100 Index joined global markets in the red after Wednesday's United States interest rate hike and as oil prices remained under pressure. The Fed admitted that inflation is below its 2% target and is likely to stay there in the near term, Forbes reports.

In commodities, oil prices fell more than 1 percent, on the backfoot again on worries about U.S. oversupply.

On Wall Street, stocks closed mixed after the Fed's announcement. Only Neel Kashkari, president of the Minneapolis Fed bank, opposed the increase.

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