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The Fed raises interest rates by a quarter percentage point

30 September, 2018, 05:12 | Author: Melinda Barton
  • Fed announces interest rate decision

The Fed projects one more rate boost before the end of the year and three in 2019.

The Fed's statement will likely strike a bullish tone on the economy yet again; the labor market is near full employment, jobless claims are at a 48-year low, and consumer confidence is at an 18-year high. The unemployment rate in the United States reached 3.9 per cent in August, an 18-year low, while annual inflation reached 2.7 per cent in the same month.

WALL STREET: Major U.S. indexes fell after the Fed pushed interest rates higher as expected. "Growth is running at a healthy clip". Not since the late 1960s has unemployment fallen that low. Inflation is low and stable.

The chairman added, though: "That's not to say everything is flawless".

Powell said the gradual pace was helping to support the continued economic expansion, even as the benefits have not reached all Americans.

To put this in perspective, since the Fed began raising rates, the average credit card rate has jumped from 15.78 percent to 17.32 percent; the average home equity line of credit has climbed from 4.75 percent to 6.08 percent, according to Bankrate.com. "Financial markets should prepare for a more hawkish tone", Natixis economists Joseph Lavorgna and Thomas Julien wrote ahead of the meeting.

Stocks added slightly to their gains in afternoon trading after the Federal Reserve nudged its benchmark short-term interest rate higher. Most observers expect a fourth hike before the end of 2018.

President Trump expressed his displeasure over the Federal Reserve raising the benchmark interest rate by another quarter-percentage point.

Analysts worry that raising rates too quickly could tip the economy into recession.

"The market has suddenly found itself in the doldrums with the Fed's rate hike out of the way and with impact from trade tension woes receding", said Koji Fukaya, president of FPG Securities in Tokyo.

"We don't consider political factors". "My colleagues and I are focused, exclusively, on carrying out that mission".

The Fed has now raised the key rate eight times since late 2015, with one more expected in the final meeting of the year in December.

The Fed raised its expectation for economic growth this year to 3.1% from 2.8%, reflecting strength in the second and current quarters. The Fed said it expects the GDP to fall to 2.5 percent next year, to 2 percent in 2020 and 1.8 percent in 2021. The measures have disrupted supply chains and caused retaliation against USA exports in the economies of the nations affected.

Powell also commented on the ongoing trade war and its effect on inflation. Household spending, as well as business investment, have grown strongly.

From Argentina to Turkey, many of emerging economies have been hit by turbulence as a strengthening US dollar helped send their own currencies into a skid.

Some investors also say trade disputes between the Trump administration and several trading partners are adding more uncertainty to the economic outlook.

"It's a concern", Powell said. Now, as a result of the rate increases we've seen since then, you'd be paying $1,554 based on an April of 15.54 percent - a almost $200 difference. You don't see it yet. "We don't see it yet but you could see retail prices moving up", he said. "The tariffs might provide a basis for companies to raise prices in a world where they've been very reluctant to and unable to raise prices".



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