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vegassports-odds.com June 21, 2018


Fed raises key rate, sees possible acceleration in hikes

14 June 2018, 09:06 | Melvin Schneider

Federal Reserve raises interest rates

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The FOMC statement stressed that rising interest rates were unlikely to derail economic growth - which the committee now characterises as "strong" rather than "moderate" - and again made clear the Fed had some tolerance for inflation above its 2 per cent target.

As widely expected, the Fed lifted key overnight borrowing costs by a quarter percentage point for a second time this year, to between 1.75 and 2.00 percent.

"Despite the risks presented by trade wars and emerging market difficulties, the Fed appears confident in the outlook and has opted to increase rates by a further 25 basis points".

In a notable change to its statement, the Fed removed language indicating that it expected the economy to grow at a pace warranting "gradual" rate increases.

Officials lowered their jobless-rate estimates after unemployment fell to 3.8 per cent as of May, matching April 2000 as the lowest reading since 1969. The most immediately affected will be credit-card interest rates, which are subject to near-instantaneous revision to track the federal funds rate. In the United Kingdom, the Bank has stopped actively buying financial assets and interest rates are up a little from their lows.

It's the second rate increase of this year and Fed officials anticipate one or two additional hikes before 2019.

The Fed announcement helped resolved a debate in financial markets over whether the Fed under Jerome Powell, who succeeded Janet Yellen as chairman in February, might see a need to signal a possible acceleration in rate hikes.

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The Fed's growth forecast for 2019 and 2020 was unchanged, at 2.4 percent and 2 percent, respectively.

The change will start in January following the meetings that are scheduled roughly once every six weeks, to give the Fed "more opportunities to explain our actions", Mr Powell told reporters.

"Economic activity has been rising at a "solid" rate, the Fed's statement said, marking an upgrade from "moderate" in the previous statement".

Since the Fed began holding quarterly news conferences in 2011, it has announced major policy moves only at the quarterly meetings, which have all been followed by a news conference by leader of the Fed.

The new median forecast projects the Fed's benchmark rate at 3.1 percent by the end of 2019, up from 2.9 percent in the previous forecast. But that exorbitant rate is likely to go up to 15.57% within two billing cycles, CompareCards says, as lenders pass along the higher rates to clients. Inflation expectations are slightly higher this year compared to March's forecast of 1.9%.

Fast-forward to April of this year when data showed that USA job openings jumped to a record high, far outpacing hiring. "The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation". A positive change in employment of 18K is expected.



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