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Fed Raises Interest Rates, Signals Faster Hikes on the Way
13 June 2018, 10:29 | Kelvin Horton
Stephen Stanley chief economist at Amherst Pierpont and Bob Browne Northern Trust CIO discuss the
The Federal Reserve raised a key interest rate another quarter-point on Wednesday. That puts the Fed on track for four rate hikes total in 2018, something the Fed hasn't done since 2006.
The Fed announcement helped resolved a debate in financial markets over whether the Fed under Jerome Powell, who succeeded Janet Yellen as chairman in February, might see a need to signal a possible acceleration in rate hikes. The federal funds target rate, which is now between 1.75 and 2 percent, is the highest it's been in almost a decade, indicating that the nation's central bank has confidence the economy will continue to expand.
Though rates are now roughly positive on an inflation-adjusted basis, the Fed still described its monetary policy as "accommodative", with gradual rate increases likely warranted as a sturdy economy enters a 10th straight year of growth.
Rates for savers have tended to lag the Fed's hikes. The Fed expects inflation higher than 2% over the next two years, according to its latest projections.
Economists and Wall Street strategists are closely following the Fed's policy views.
The decision reflected an economy that's getting even stronger.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. Unemployment, now at an 18-year low of 3.8 percent, would drop to 3.6 percent by year's end and to 3.5 percent in 2019 and 2020 - levels not seen in 49 years.
A gradual rise in inflation is coinciding with newfound economic strength. The Fed is raising rates gradually to keep the economy in check.
Fed says raises interest on excess reserves rate to 1.95 pct from 1.75 pct.
The unemployment rate is 3.8%, the lowest since 2000 and tied for the lowest reading since 1969. All those countries have vowed to retaliate against any US tariffs with their own penalties against USA goods.
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