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The Pound and Stocks Fall on Surprise Fed Decision

The Pound and Stocks Fall on Surprise Fed Decision

Investors were taken by surprise late on Thursday as the US Federal Reserve decided to raise the base discount rate to 0.75% - up by 25 basis points.

Although it had been announced last week that a rate rise was in the pipeline, markets did not expect the Fed to act so quickly – and consequently global stocks in Europe, Asia and the US fell. 

Investors were fed by what they saw as a sign of future interest rate hikes, yet senior Fed officials said that the news was being ‘overblown’ and that this decision was merely one to increase ‘normalization’.

Before the financial crisis took hold, the discount rate was generally around 1%.

The pound also fell, hitting nine-month lows against the US dollar after weak retail sales figures for January were released.  By mid-morning trade in London, the pound retreated to $1.5345.

Retail sales fell by more than had been expected, down by 1.8% on the month in January.  This was the worst slip in over a year.