Fed Raises Interest Rates, Signals Faster Hikes on the Way

Fed raises interest rates and signals faster hikes on the way

Fed raises interest rates and signals faster hikes on the way

The Federal Reserve raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the USA central bank's shift from policies used to battle the 2007-2009 financial crisis and recession.

That implies four total rate increases this year.

Fed Chairman Jerome Powell will hold a press conference at the conclusion of the two-day June meeting. US companies are hiring at a rapid pace and consumer and business spending remains healthy, the Fed noted, and core inflation is finally expected to hit the central bank's target of 2 percent this year.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.

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".

Following the Fed's rate decision, the FOMC releases its statement regarding monetary policy.

The decision reflected an economy that's getting even stronger. Unemployment is already at 3.8 percent, the lowest since 2000, and the Fed believes it will fall to 3.6 percent by the end of the year, which would be the best rate since the 1960s. The unemployment rate is seen falling to 3.6 percent in 2018, compared to the 3.8 percent forecast in March.

A gradual rise in inflation is coinciding with newfound economic strength.

Rates for conventional mortgages are likely to see more gradual change.

The Fed's pace of rate hikes for the rest of the year could end up reflecting a tug of war between a sturdy economy and the risks to growth, including from a potential trade war that could break out between the United States and such key trading partners as China, the European Union, Canada and Mexico.

Trump's imposition of tariffs on steel and aluminum imports has enraged USA allies.

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