Federal Reserve Raises Interest Rates in Second Hike This Year

Federal Reserve Raises Interest Rates in Second Hike This Year

Investing.com  | Jun 13, 2018 02:00PM ET

Federal Reserve Raises Interest Rates in Second Hike This Year

Investing.com - The Federal Reserve raised interest rates by a quarter point on Wednesday, its second rate hike this year, and signalled a faster pace of rate hikes this year.

The Federal Open Market Committee increased the overnight funds rate to a range of 1.75% to 2.00%.

"The Committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective over the medium term," The Federal Reserve said in a statement.

Futures traders had seen an around 92.5% chance of a rate increase ahead of the meeting, according to Investing.com’s Fed Rate Monitor Tool.

Members of the rate-setting committee raised their 2018 median forecast for interest rates to 2.4% from a previous estimate of 2.1%, hinting at an additional two rate hikes in 2018. The interest-rate outlook for 2019 was raised to 3.1% from 2.9% in March while 2020's was left unchanged at 3.4%.

"While that move in the median reflected only one participant moving their outlook, it is likely that several of the more influential Committee members now anticipate two second-half hikes," JPMorgan said.

In a sign of confidence in the U.S. economy, members of the rate-setting committee raised their economic growth projection for this year, forecasting U.S. economic growth of 2.8% in 2018, a 0.1% increase from the previous projection of 2.7% in March.

The Federal Reserve also raised its outlook on inflation, forecasting Core-PCE inflation outlook for 2018 at 2.0%, up 0.1% from the previous forecast. While Core-PCE Inflation for 2019 and 2020 was left unchanged.

The central bank's upbeat outlook on inflation comes as figures on Tuesday showed that annual inflation rose by 2.8% in May, while core or underlying inflation rose by 2.2% year-over-year.

According to the minutes from the Fed’s May policy meeting, policymakers are less concerned about inflation rising above the Fed’s 2% target than they are about the rate of inflation dipping again.

The labor market is expected to tighten further in 2018, with the unemployment rate expected at 3.6%, down from a prior forecast of 3.8%. The central bank forecasts the unemployment rate for both 2019 and 2020 at 3.5%, down from 3.6% previously.

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Gold Follower
Gold Follower

When previously has unumployment rate stayed at full employment levels for 3 straight years? Never...it is against modern economic theories...  ... (Read More)

Jun 14, 2018 06:16AM GMT· Reply
michael hammer
michael hammer

It's like they're trying to crash the economy.  ... (Read More)

Jun 13, 2018 07:40PM GMT· 2 · Reply
Andri Lim
Andri Lim

So dollar Will up?  ... (Read More)

Jun 13, 2018 06:18PM GMT· 3 · Reply
Alaba Jimoh
Alaba Jimoh

Its time to make some good harvest again.  ... (Read More)

Jun 13, 2018 06:13PM GMT· Reply
Sunny Chase
Sunny Chase

Crash the economy fast, full speed ahead.  ... (Read More)

Jun 13, 2018 06:08PM GMT· Reply
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