Jun 14 2018

Fed rate hiked and look forward to more…

The US central bank’s rate-setting Federal Open Market Committee after the end of a two-day meeting, has increased the benchmark overnight lending rate by quarter percentage. The interest rate is now in range 1.75 percent to 2 percent. The rates have been raised seven times since late 2015 on back of economy’s continuing expansion and solid job growth.

Policymakers unanimously projected a slightly faster pace of rate increases in the coming months, with two additional hikes expected by the end of this year, compared to one previously.

The Fed dropped its pledge to keep rates low enough to stimulate the economy ‘for sometime’ and signaled it would tolerate above-target inflation at least through 2020.

The Fed officials no longer viewed the US economy needing a boost and are instead worrying about inflation threat. Fresh projections from the policymakers indicated an inflation to run above the 2 percent target, hitting 2.1 percent this year.

They noted that the economic activity has been rising ‘at a solid rate’ from an earlier ‘moderate’ during the last meeting in May.  Quarterly economy growth is expected at 2.8 percent this year from 2.7 percent in March. An increase in housing expenditure while business fixed investment has continued to grow strongly.

The policymakers predict the unemployment rate to dip to 3.6 percent by the year end, down from a forecast of 3.8 percent in March.