The Fed is repeating its mistakes of the 1970s — KASHKARI

Adjustable mortgage rates were mixed, with the 3-year ARM slipping to 3.48 percent while the 7-year ARM climbed to 3.60 percent.

If it feels precarious to have so many investments doing so well, particularly when the economy itself is still growing only modestly, markets are giving few indications of worry. And auto loan rates won't likely change much. The Bank of Japan will be issuing its statement early on Friday, and yen traders are waiting in high anticipation.

RATE HIKE: The Federal Reserve raised interest rates for the third time since December, something investors had widely expected based on the Fed's recent statements.

And the consequences range beyond US shores. "Notably, however, the Fed's inflation outlook (was) lowered, reflecting a more moderated outlook that is expected to invite more scrutiny on their upcoming decisions".

The Federal Reserve chose to raise the rate despite revising its projections for inflation down to 1.6 percent for this year, less than its target of two percent. The number of Americans filing unemployment claims fell more than expected last week, suggesting that slack in the labor market was shrinking, and the Philadelphia Fed business conditions index for June beat expectations after a strong reading in May. She went on to say that, rather than relying on "some preconceived notions", by which she presumably meant any firm belief in what the NAIRU is, she and her colleagues were keeping a close eye on actual developments in the economy.

The Fed has now raised rates 4X as part of a normalization of monetary policy that began in December 2015.

The increase on residential mortgages will take effect on September 12. Sometimes they even move in the opposite direction. "Another area of concern is auto lending - particularly in the subprime segment - where underwriting appears to have become quite lax previous year and, consequently, delinquency rates indicate more borrowers struggling to keep up with their payments".

New Zealand's two-year swap rate fell 1 basis point to 2.15 percent while the 10-year swap rate rose 4 basis points to 3.14 percent. But inflation has been tame - at least, it's been low by the Fed's favorite measurement.

"The key takeaway we got was that the Fed expects economic data (particularly inflation) to rebound soon and if so, it will proceed with its hiking plans". It's also the lowest the rate has been in over a decade. When global investors grow nervous, they often pour money into Treasurys because they're seen as ultra-safe. This process could put upward pressure on long-term borrowing rates. As the jobless rate dropped from 5.3 per cent, last May, to 4.8 per cent, in January, the inflation rate picked up a bit, which was consistent with a NAIRU in the range of five per cent.

Like the Fed, the Bank of England on Thursday surprised to the hawkish side, as markets got the sense that interest rates in the United Kingdom would potentially rise sooner than expected.

"The economy is doing well, is showing resilience", Yellen said in her quarterly press conference. "On the other side, several developing countries have debt in dollars".

The reports followed weak US inflation data on Wednesday.

“Any impact on the rates will be communicated through our usual channels.”. The only major currency the United States dollars hasn't been able to rise against is GBP, following the Bank of England meeting. That's the level the Fed believes is a neutral rate - neither stimulating growth nor restraining it.

While there has been some speculation that the People's Bank of China could follow suit, on Thursday China's interest rates for open market operations remained unchanged. The huge national banks already have "more deposits than they know what to do with", McBride said, so haven't lifted their rates at all.

In other words, the fourth rate hike has been accompanied by negative returns in the following year, but this is shaping up to be one of the exceptions. The pound has hovered near the $1.27 mark after a almost 3 percent fall in the wake of Britain's election last week.

Q. What if I'm a retiree invested in bonds?

If there's any equity ETF segment that nearly always comes to investors' rescue, then that is dividend. And that might well prompt you to start raising interest rates to prevent an inflationary spiral from developing.

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