Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

Search ASX code:
Generic filters

How will the US Fed’s interest rate rises affect ASX shares?

The US Federal Reserve has indicated that interest rate rises are likely to come earlier than expected. What does this mean for ASX shares?

US Federal Reserve indications

The members of the US Federal Reserve have just held their meeting. Inflation and economic growth is stronger than original expectations.

According to reporting by the Australian Financial Review, officials expect to start raising interest rates next year with two hikes by 2023.

Overall inflation is expected to be 3.4% this year, up from previous expectations of 2.4% three months ago. Economic growth is expected to be up to 7% for the year, stronger than previous expectations of 6.5%.

Fed commentary

Federal Reserve Chairman Jerome Powell had some comments, as reported by the AFR:

“Inflation has come in ahead of expectations in the last few months. Is there a risk that inflation could be higher than we think? Yes.

“There is a lot of uncertainty. We need to see how things evolve in coming months. This is an extraordinarily unusual time. The economy is growing at a very healthy rate. Since March, people have grown more confident that these strong outcomes will be achieved.”

He also said that it would be appropriate to consider announcing a plan for reducing asset purchases at a future meeting, though the Fed will give advance notice before announcing any decision. The timing of reducing quantitative easing will be based on the progress of employment and inflation goals, rather than based on a date.

Mr Powell said: “We will taper when we feel the economy has achieved substantial process. We will do what we can to avoid a market reaction.”

What does this mean for ASX shares?

Interest rates are meant to play a very important part in the valuation of businesses. Rising interest rates can be a good thing for businesses that make money from interest such as Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group Ltd (ASX: ANZ), Computershare Ltd (ASX: CPU) and Netwealth Ltd (ASX: NWL).

However, business that have debt, or are asset plays, may see some volatility. I’m thinking of names like Goodman Group (ASX: GMG), Afterpay Ltd (ASX: APT) and Sydney Airport Holdings Pty Ltd (ASX: SYD).

Rising US interest rates could also have an impact on exchange rates. A higher US interest rate might make the US dollar seem more attractive and the Australian dollar less attractive. This would impact businesses like CSL Limited (ASX: CSL), BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO).

It’ll be interesting to see what happens today and the next few years with interest rates and asset prices.

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW or simply entering your email below.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.

Are you stuck wondering where to invest right now? Have you got cash 'sitting on the sidelines'? Are you looking for dividend income AND growth but don't know where to start? Rask's expert ASX analyst team has just released a full report, detailing where we'd invest $10,000 right now.

Not only are we offering these 11 investment ideas completely FREE, we've also released an in-depth podcast to go with the report!

So, whether you have $2,000 or $50,000, our brand new analyst report could help transform your watchlist. Right now, you can get the full analyst report emailed to you for FREE by CLICKING HERE NOW.

At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

Information warning: The information on this website is published by The Rask Group Pty Ltd (ABN: 36 622 810 995) is limited to factual information or (at most) general financial advice only. That means, the information and advice does not take into account your objectives, financial situation or needs. It is not specific to you, your needs, goals or objectives. Because of that, you should consider if the advice is appropriate to you and your needs, before acting on the information. If you don’t know what your needs are, you should consult a trusted and licensed financial adviser who can provide you with personal financial product advice. In addition, you should obtain and read the product disclosure statement (PDS) before making a decision to acquire a financial product. Please read our Terms and Conditions and Financial Services Guide before using this website. The Rask Group Pty Ltd is a Corporate Authorised Representative (#1280930) of AFSL #383169.

LIVE ASX Chat - Join in!

Play Video

Keep reading:

Rask Analyst’s $10,000 Hypothetical Portfolio 

Rask Australia’s expert analysts have just released 11 stock & ETF positions they’d buy right now as part of a $10,000 hypothetical portfolio. 

Completely free, this report comes with the exact ticker codes, how much the analysts would invest and a detailed over the company and why we like it. Plus a 60-min podcast! 

Simply enter your email address and we’ll send you the report.

Unsubscribe anytime. Read our TermsFinancial Services GuidePrivacy Policy. We’ll never sell your email address. Our company is Australian owned.