AFTER raising its benchmark interest rate in response to a strengthening U.S. economy, the U.S. Federal Reserve foresees three more hikes in 2017.

    Wednesday’s action signaled the Fed’s belief that the economy has improved over the past year after a rough start to 2016 and can withstand slightly higher borrowing rates. Its expectation of three rate increases in 2017 is up from two in its forecast three months ago.

    The central bank said in a statement after its latest policy meeting that it’s raising its benchmark rate by a quarter-point to a still-low range of 0.5 percent to 0.75 percent, for the first and only time in 2016. The Fed had most recently raised the rate last December from a record low near zero set during the 2008 financial crisis.

    Responding to a question at a news conference, Chair Janet Yellen said she didn’t think the economy needed stimulus from President-elect Donald Trump’s proposed tax cuts and infrastructure spending — the kind of fiscal support that Yellen and her predecessor, Ben Bernanke, had called for in the past.

    The Fed chair stressed that she wasn’t providing advice or guidance to the incoming Trump administration. She downplayed any expectations that Trump’s economic program could lead to faster rate hikes resulting from higher inflation.

    The Fed’s move, only the second rate hike in the past decade, came on a unanimous 10-0 vote. The central bank also released updated forecasts that showed modest changes to its outlook for growth, unemployment and inflation, mainly to take account of a stronger economy and job market.

    Stock investors appeared disappointed by the Fed’s forecast of three rate increases in 2017. The Dow Jones industrial average closed down about 118 points — 0.6 percent — a sign that stock investors are pricing in additional Fed rate hikes. The yield on the 10-year treasury rose to 2.57 percent from 2.47 percent.

    The central parity rate of China’s renminbi weakened 261 basis points to 6.9289 against the U.S. dollar Thursday, according to the China Foreign Exchange Trading System.

    As the Chinese economy maintains medium-high growth, the renminbi has the conditions to remain basically stable, according to the National Bureau of Statistics.

    In China’s spot foreign exchange market, the yuan is allowed to rise or fall by 2 percent from the central parity rate each trading day.

    China treasury bond futures also slumped in early trading Thursday.

    The 10-year treasury bond futures contract dropped 1.99 percent, the biggest loss since its debut, to 94.38 yuan (about US$13.6). The five-year treasury bond futures contract fell 1.2 percent to 97.56 yuan. On the interbank market, yields on the treasury bond futures contract for settlement in 2026 surged to 3.36 percent.

    Yields on short-term U.S. debt surged to their highest level since 2009, sending the dollar to a near-14-year peak.

    (SD-Xinhua)

    (HK raises base rate: P5)