Home » Money

Federal Reserve raises USA interest rates again

15 June, 2018, 01:57 | Author: Melinda Barton
  • If core consumer price inflation surprises on the upside this week Amazon may be one of the culprits

The federal government drastically upgraded its forecasted 2018 economic outlook Wednesday, saying the USA economy was rising at a "solid" rate; an increase from its previous prediction of "moderate" growth.

The central bank also signaled two more hikes are coming in 2018 and four in 2019, a possible sign of concern about accelerating inflation in the US.

And so after what seemed like an arcane and abstract policy change from the Fed on Wednesday, this is the impact that may matter most to those who don't follow the news as closely as they follow their credit-card bill.

Chairman Jerome Powell is scheduled to hold a press conference at 2:30 p.m., his second since taking the helm from Janet Yellen in February.

In another slight change of language - something sure to catch the attention of Fed watchers - it said "further gradual increases" in the key rate "will be consistent with sustained expansion of economic activity, strong labour market conditions and inflation near the Committee's symmetric two per cent objective over the medium term".

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. He'll likely address the decision to hike rates and the Fed's views on the overall economic outlook.

"We don't think that the natural rate of unemployment - it's not one of those variables that moves around a lot", Powell said Wednesday.

The central bank's updated projections showed that policymakers' median expectation for economic growth for this year rose a notch to 2.8 percent from its previous forecast in March.


Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 per cent in 2020 before dropping to 2.9 per cent in the longer run.

Fed policy makers now see US unemployment at 3.6 per cent in the fourth quarter, followed by 3.5 per cent in 2019 and 2020, based on median projections. Nor is there a rule that says rate hikes can't be announced between the official meetings of the Federal Open Market Committee, which concluded this month's session Wednesday. The Fed's new projection sees inflation at 2.1 percent, compared with 1.9 percent in its March forecast. Hence, we can see the USA 10-year yield to enter uncharted territory above 3 percent in medium term.

The forecast for real GDP growth for 2018 was revised to 2.8 percent from 2.7 earlier.

But it's widely expected that - if not at this meeting, then next month - the European Central Bank will set out a timetable for when it ends its quantitative easing program, which may be as early as the end of this year.

Interest rate hikes will hit consumers in their wallets.

Nor is the Fed obligated to hike rates just because it has publicly said it will do so.

US 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.

The Fed has partially attributed sluggish wage growth to low productivity, or value added per hour on the job, and suggests the situation could stabilize with continued economic growth.

Recommended:



Popular

Vladimir Putin invites Kim Jong Un to Russia in September
But behind closed doors, Pompeo faces tougher questions from American allies about some of Trump's public declarations, he said. Pomepo said regional powers remained "committed to the complete, verifiable, and irreversible denuclearization of North Korea".

MAN Faces His Greatest Enemies In New E3 2018 Trailer
It was only about a 20-minute demo, but we definitely got better at moving from point A to point B by the time things concluded. Although the wait is nearly over, we now have a new trailer that is sure to blow everyone's minds.

Former US ambassador to Canada: Navarro comments 'unconscionable'
He also said the USA had a trade deficit of $17 billion with Canada, though he implied that it might be as large as $100 billion. A Trump adviser had suggested Sunday that Trump saw Trudeau as trying to weaken his hand before the meeting with Kim.

Kim Trump summit: Leaders meet in Singapore
Kim Jong Un has reportedly taken his own toilet to the Singapore summit where he is due to have nuclear talks with Donald Trump . Lee has said the summit would cost Singapore about S$20 million ($15 million), more than half of which would go on security.

Justify dominates Belmont to become 13th Triple Crown victor
He stood so quietly in the starting gate that jockey Mike Smith wondered if he'd respond when it sprang open. The 7-year-old bay horse won by 2 1/4 lengths and paid $9.10 to win - a generous price on a Baffert trainee.

Mohamed Salah: We want to make history, achieve something different
Egypt are optimistic Salah will be fit for their World Cup Group A campaign against Uruguay (June 14), hosts Russia (June 19) and Saudi Arabia (June 25).

Throw away pre-cut melon, CDC warns in multistate salmonella outbreak
So far only pre-cut melons have been linked, but it's important to remember food safety measures if you buy whole melons. The individuals who became ill said they ate pre-cut cantaloupe, watermelon or a fruit salad mix that contained melon.

Trump vows to 'straighten out' G7 trade ahead of tense meeting
Canadian Prime Minister Justin Trudeau called United States metal tariffs "insulting" and announced retaliatory measures. On Twittter, Trump also called Canadian Prime Minister Justin Trudeau "indignant" for his country's trade practices.

Kendrick Perkins Flips Off Kevin Durant During Press Conference
Smith (13 points) was the only other Cavaliers player to score in double-figures. Nothing's going in Cleveland's way, so far, in the 2018 NBA Finals .

Liverpool to complete £55m Nabil Fekir transfer in next 24 hours
Fekir has also drawn interest from Chelsea and Bayern Munich, but Liverpool have been aggressive in chasing his signature. The France worldwide had not been expected to finalise a switch to Merseyside before the end of this summer's World Cup .