The stronger-than-expected U.S. economic data also boosted most U.S. Treasury yields, while traders weighed the hawkish Federal Reserve and Bank of England signals. The dollar would get strengthened by the Fed's move. "Three percent is well above the current 10-year Treasury yield". Higher rates make it more expensive for companies and consumers to borrow money, affecting everything from loans to credit card rates to home mortgages.
Euro zone government bond yields rose, reflecting post-Fed moves in U.S. Treasuries, whose yields had earlier fallen after weaker-than-forecast inflation and retail sales data triggered alarm about the underlying health of the U.S. economy.
The data had knocked the dollar and US bond yields to its lowest level in seven months against a basket of currencies.
"It's very much a full-steam-ahead message, and the dot plot says they expect to hike once more this year". They acknowledged that inflation was running below target, but also that job gains have been solid.
"Increases in the interest rates were fine".
Stocks fell in Europe and Asia on Thursday as investor concern over the pace of US economic growth overshadowed a widely telegraphed rise in Federal Reserve interest rates that lifted the dollar off recent lows.
Fed officials voted 8-1 to raise the federal funds rate to a range of 1 to 1.25 percent. Each increase adversely affects developing countries that are in dollar dependence on the U.S. The gap between the poor and rich inhabitants of the planet becomes deeper. Only Neel Kashkari, president of the Minneapolis Fed bank, opposed the increase.
The implementation of its proposed balance sheet normalisation programme a gradual reduction in Fed's holding of securities - this year, would also depend on how the economy evolves, it added. The Fed's annual target is 2 percent, which policymakers still anticipate will be reached next year.
The market's five-year outlook for inflation in five years time has been falling steadily and now stands at a seven-month trough of 2.18 per cent.
The yuan is on a steadier footing amid tighter liquidity conditions now, and one foreign exchange trader believed that China refrained from raising rates because it did not want to establish a pattern of following the Fed.