Fed Raises Rates and Signals Faster Pace in Coming Years

Eileen GuzmanJun 14, 2018

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 central bank raised its key short-term rate by a modest quarter-point to a still-low range of 1.75 per cent to 2 per cent.

The Federal Reserve on Wednesday raised interest rates 0.25 points as the bank aims to prevent a tight labor market from driving inflation to unsustainable levels. "The Fed is prepared to be quicker about pushing rates higher".

Economists said the Fed left little doubt that it's prepared to increase the pace of its credit tightening to guard against high inflation later on.

The Fed cited the strength of the economy in its statement announcing the rate hike. Yet this time, the median forecast for the Federal Funds Rate for end-2018 rose to a total of four rate hikes from three hikes last time. The Fed expects inflation higher than 2% over the next two years, according to its latest projections. The Fed targets core inflation and it is finally on the rise.

The unemployment rate, now at an 18-year low of 3.8 percent, is expected to fall to 3.6 percent this year, compared to the 3.8 percent that the Fed projected in March. "The trajectory of USA inflation or the broader US economy would likely need to change materially for the FOMC to deviate from that path", said Aaron Anderson, senior vice president of research at Fisher Investments.

Wall Street was not happy by the aggressive new stance and all three major indexes turned negative right after the announcement with the Dow down 0.23

The Feds meeting this week is to be followed by policy meetings of two other major central banks — the European Central Bank on Thursday and the Bank of Japan on Friday.

The latest rate increase was in line with investors' expectations ahead of the release of the policy statement.

The 3.8-percent jobless rate is close to the lowest level ever seen in the U.S. There are more job openings than workers seeking employment in the country for the first time in recorded history, and recent inflation data shows prices inching through the Fed's ideal threshold.

According to CNBC, the Reserve released new data this week showing the GDP forecast rose to almost 3%, up from the previous predictions of 2.7%. The top interest rate now on offer for a savings account is just 2.05 percent, according to Bankrate, with the average rate only 0.06 percent. Interest rates on new fixed-rate mortgages could also climb.

Trump has slapped tariffs on steel and aluminum imports, has threatened additional tariffs on Chinese imports and has directed his administration to consider further duties on imported cars.

Individual Fed policymakers have expressed concerns about the economic risks of a broad tit-for-tat tariff retaliation, but have said they would not change their policies or forecasts until those risks are realized.

Related Articles:



« Previous article
Next article »


Popular Pages

Canada rallies to Trudeau after Trump's insult
All lawmakers gave a standing ovation for the government's response to the Trump administration's verbal attacks on Trudeau. The Trump-Trudeau scuffle represents a pivot away from the once-friendly relationship between the two leaders.

New Trailer for SpectreVision & Ubisoft Montreal’s TRANSFERENCE Unveiled at E3
Transference is slated to launch in Fall 2018 on PlayStation VR, HTC Vive, Oculus Rift, PlayStation 4, Xbox One, and PC. It's upon you to uncover the secret of the family and make their lives better by exploring maze-like puzzles.

Latest Forecast for Hurricane Bud
At least some peripheral impacts are possible near the coast from future Bud, even if the center remains offshore. As of the Tuesday morning advisory, winds were up to 130 miles per hour making Bud a major category 4 hurricane.

Losing Owner Ignites a Triple Crown Brouhaha
Lewandowski indicated neither he nor his fellow stewards plan to discuss race strategy with Florent Geroux". He will be one of the better rested horses in the race, and at a mile and a half that could be important.

More rain, but sun returns later this week — Portland weather Sunday
We will not be completely rain free, but more of us than not should be able to get out and get some outdoor chores taken care of. Beyond Wednesday , rain chances become minimal as high temperatures creep back into the 90s for the second half of the week.

NCAA rule change means athletes no longer need permission to transfer
Upon being entered into the database, college coaches will be allowed to contact the athlete freely and without permission. The change will come with stricter tampering rules to help appease coaches who worry illegal recruiting could rise.

U.S., Canada and Mexico to Host World Cup in 2026
Upon being awarded with the World Cup , the United 2026 organizing committee unveiled 23 finalists to be among the 16 host cities. For the first time in more than 30 years, the US men's national soccer team will not compete, after failing to qualify.

Cyberpunk 2077 Promises Stunning Character Creation, Male or Female
With such an open-world experience to offer, we're going t obe spending a lot of time with the protagonist. Cyberpunk 2077 also lets you attack enemies when behind the wheel, as the AI takes over driving duties.

Harry Potter And The Cursed Child scoops gongs at the Tony Awards
Andrew Garfield picked up the first award of the night for Best Actor in a Play for his role in Angels in America . Also shut out was " Frozen , " the stage adaptation of the blockbuster Disney film.

Trump Kim summit: Pentagon remains 'ironclad' after war games cancelled
He pointed out that North Korean traders used to make up the bulk of his business and now, he's had to find other ways to survive. The United States and South Korea blacklisted him for supporting the North's weapons programs in 2010 and 2016, respectively.