ibusinesslines.com
ibusinesslines.com June 18, 2018


Fed Raises Interest Rates, Signals 2 More Hikes This Year

14 June 2018, 05:43 | Kelvin Horton

Federal Reserve raises interest rates

Will the Fed Break the Dollar's and S&P 500's Calm

That puts the Fed on track for four rate hikes total in 2018, something the Fed hasn't done since 2006.

According to CNBC, the Reserve released new data this week showing the GDP forecast rose to almost 3%, up from the previous predictions of 2.7%.

Policy makers said in a one-page statement that the labor market "has continued to strengthen" and than economic activity "has been rising at a solid rate". "Higher rates and higher payments will squeeze the buying power of households without a compensating increase in wages".

Job growth has consistently outperformed in recent years, driving unemployment down to 3.8 percent in May, the lowest reading since 2000.

It is the seventh time the bank has raised rates since 2015.

Growth is also expected to stay close to nearly 3 percent of GDP through the year, and Fed officials are eager to prevent the economy from overheating.

This will raise borrowing costs for credit cards, auto financing, mortgages, and other loans, but help savers earn more interest on their deposits.

Also notable was that the Fed deleted about 80 words of its statement that said it expected the economy to "evolve in a manner that will warrant further gradual increases" in rates.


The central bank's new median forecast projects the Fed's benchmark rate at 3.1 percent by the end of 2019, up from 2.9 percent in the previous forecast.

On inflation, policy makers forecast a slight overshoot of their target starting in 2018 at 2.1 per cent, and running through 2019 and 2020, compared with a 2020 overshoot in March's projections.

Wholesale price inflation came in much hotter than expected which was in contrast to Tuesday consumer price index.

Eurozone industrial production dropped -0.9 month over month in April, more than feared and leaving the annual rate at 1.7% year over year. He'll likely address the decision to hike rates and the Fed's views on the overall economic outlook.

USA central bankers again emphasized on Wednesday that the goal is "symmetric", and they said in minutes of the May meeting that "a temporary period of inflation modestly above 2 per cent" would help anchor long-run inflation expectations around the target.

Yields earlier swung between gains and losses as investors awaited guidance about whether policy makers see enough pressure on prices to increase their projected pace of interest rate increases, or whether concerns about the ability of the economy to sustain its growth in coming years might lead to a pullback in forecasts of rate increases in coming years, analysts said.

The median estimate for economic growth this year rose to 2.8 per cent from 2.7 per cent in March, with projections unchanged for 2.4 per cent in 2019 and 2 per cent in 2020.



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