New Federal Reserve head approves first rate hike of 2018

07 April, 2018, 00:44 | Author: Natasha Holloway
  • Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York

Yet forecasts released by the Fed after it raised rates suggest a growing number of Fed officials want the central bank to start sliding over to the fast lane.

"In view of realized and expected labor market conditions and inflation", the Fed made a decision to raise the target range for the federal funds rate to 1.5 to 1.75 percent, the central bank said in a statement after concluding a two-day meeting.

The head of the USA central bank says members of its rate-setting committee have reported "concerns" among business leaders over the impact of President Trump's protectionist agenda.

On Wednesday, Powell said he will carefully consider the possibility of holding more news conferences but that he had not decided whether to do it.

Following a whipsaw session, the S&P 500 closed lower as the central bank raised rates and signaled it will do so two more times this year as the economy continues to pick up speed. But Janet Yellen, the former Fed chairman, is not sitting in the big seat anymore.

New US Federal Reserve chair Jerome Powell fronted up to the press early Thursday morning Australia time to deliver a widely anticipated rate hike - the sixth since the Fed began lifting rates in December 2015.

The U.S. unemployment rate, now at a 17-year low of 4.1 percent, is expected to keep falling to 3.8 percent at the end of this year and 3.6 percent at the end of 2019, which would be the lowest rate in a half-century.

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Projections for the unemployment rate was lowered to 3.8% this year (from 3.9% in the December forecast) and 3.6% for 2019 and 2020 (from 3.9% and 4.0%, respectively).

For as long as anyone's counting - maybe not historians, but you know what I mean - most countries' economies have been fueled and secured by currencies backed by governments' internal banks. Virtually every USA recession is preceded by a runup in interest rates.

And indeed, the Fed now sees the median estimate for economic growth this year rising higher to 2.7 percent.

Officials also increased their expectations for economic growth this year in the United States, declaring that "the economic outlook has strengthened in recent months".

The rupee, which has strengthened a bit lately, came under pressure post the hike and is now hovering somewhere around 64.50 levels against the U.S. dollar, in the fourth quarter of this fiscal year.

The Fed said it expects to raise rates twice more this year.

The move to tighten the economy by lifting the benchmark overnight lending rate by a quarter of a percentage point (to a range of 1.5% to 1.75%) was made to keep in line with the central bank's 2% inflation target, given the growing confidence in the current US economy. Yes, there was some downgrading of the current conditions, indicating that the "growth rates of household spending and business fixed investment have moderated rom their strong fourth-quarter readings".

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