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Federal Reserve raises rates amid stronger economy

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The Federal Reserve raised interest rates for the second time this year and signalled “strong” economic growth would mean a faster pace of rate hikes this year. 

The central bank raised its benchmark rate by a quarter point to a range of 1.75% to 2%, as was widely expected. The Fed has now raised rates seven times since late 2015.

“The economy is doing very well,” Fed Chairman Jerome Powell said in a press conference.
“Most people who want to find jobs are finding them. Unemployment and inflation are low. The overall outlook for growth remains favourable.”
Unemployment is currently at an 18-year low of 3.8% and is expected to fall further to 3.6% this year.
He also signalled the central bank would tolerate inflation above its 2% target amid higher oil prices. Inflation is expected to rise to 2.1% this year.

“We know inflation is going to bounce around,” Powell said. “We didn’t overreact, I think, to inflation being under 2%. We won’t overreact to it being over 2%.”
The Fed expects the economy to expand 2.8% this year, slightly higher than its previous forecast. But the economy will slow to 2.4% next year.
Wall Street closed slightly lower with the Dow Jones industrial average down 0.47% and the dollar was little changed against a basket of currencies.

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“No move at all for the dollar index, this was the most boring reaction by traders,” Naeem Aslam, chief market analyst at Think Markets UK said.
“This is because there was nothing major in the minutes- all expected. Two more rate hikes are expected and the question is if the Fed is taking it too far. But the market doesn’t seem to think that.”

Source: SKY