Investing.com | Jun 13, 2018 02:00PM ET
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.
Written By: Investing.com
Fusion Media will not accept any liability for loss or damage as a result of reliance on the information contained within this website including data, quotes, charts and buy/sell signals. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible. Currency trading on margin involves high risk, and is not suitable for all investors. Trading or investing in cryptocurrencies carries with it potential risks. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Cryptocurrencies are not suitable for all investors. Before deciding to trade foreign exchange or any other financial instrument or cryptocurrencies you should carefully consider your investment objectives, level of experience, and risk appetite.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures), Forex and cryptocurrencies prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn’t bear any responsibility for any trading losses you might incur as a result of using this data.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.