US Fed raises interest rates, expects 2 more hikes this year

If core consumer price inflation surprises on the upside this week Amazon may be one of the culprits

If core consumer price inflation surprises on the upside this week Amazon may be one of the culprits

The unanimous vote brings the federal funds rate to a range of 1.75-2%.

The Federal Reserve took note of a resilient USA economy Wednesday by raising its benchmark interest rate for the second time this year and signalling that it may step up its pace of rate increases.

Fed officials expect to raise interest rates at least once more in 2018 and had been split on a possible fourth hike in their last meeting.

- Fed funds price in an 81% chance of a 25-bps rate hike in September, and odds for December increased from 51% to 57% as Fed Chair Powell's press conference got under way. Unemployment and inflation are low.

The Fed now sees gross domestic product growing 2.8 percent this year, slightly higher than previously forecast, and dipping to 2.4 percent next year, unchanged from policymakers' March projections.

The US economy continues to strengthen, the Fed indicated, and it no longer needs the historically low interest rates that were put in place in the aftermath of the financial crisis to stimulate growth.

The Federal Reserve is widely expected to announce in a statement at 2 p.m. ET that it chose to raise interest rates. Even if you don't count food and fuel, the increase in producer prices was 2.6 percent in the previous year.

It's a crucial uncertainty, because the natural jobless rate is a linchpin of Fed policy. At the same time, they project the unemployment rate to fall to 3.6 percent this year, down from earlier projections of 3.8 percent.

The FOMC's economic growth forecasts were little changed, with 2018 GDP seen rising 2.8 per cent rather than 2.7 per cent, but unchanged at 2.4 per cent in 2019, and 2 per cent in 2020. The Fed's latest projection now sees the unemployment rate dropping to 3.6 percent by the end of this year and dipping to 3.5 percent in the next two years. USA crude inventories came in way under expectations with a drawdown of 4.1 million barrels when a shortage of 1.4 million was forecasted.

Andrew Lincoln To Exit The Walking Dead In Season 9
Rick Grimes is a central character in The Walking Dead universe, for both the TV series and the comic books on which it is based. Andrew previously spoke about leaving the show, hinting that he was well up for giving fans an end to Rick's story.

Last year's tax cuts are boosting economic growth, Powell said, but weak wage growth remains "a bit of a mystery".

Even after Wednesday's hike, the real rates in U.S. are still negative.

Boeing and Caterpillar, two blue-chip companies with significant operations in China, both lost around two per cent.

"By just tapping the brakes more quickly, but not harder, the Fed is showing it's willing to let the economy and the expansion run", said Robert Frick, corporate economist with Navy Federal Credit Union.

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.

This means that despite the rise in United States yields, the spread/differential between United States and India's 10-year bonds has been maintained at around 4.5-5 percent, which is attractive.

Consumer loans growth in April was 5.1% YoY, sustaining the strong momentum we saw since in November.

They signaled previously that they wouldn't overreact if inflation overshot the target, but they haven't said how much of an overshoot they will tolerate, or for how long.

Recommended News

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.