Fed interest rate: Federal Reserve hikes interest rate another quarter point today

Fed raises interest rates and signals faster hikes on the way

Fed raises interest rates and signals faster hikes on the way

"In view of realized and expected labor market conditions and inflation, the Committee made a decision to raise the target range for the federal funds rate to 1-3/4 to 2 percent", read a portion of a Federal Open Market Committee statement released Wednesday afternoon.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run. "The Fed is prepared to be quicker about pushing rates higher".

The Fed was widely expected to raise interest rates Wednesday amid strong economic data. Officials penciled in a total of four rate increases for this year, up from a projection of three increases at their March meeting.

"Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly", the Fed wrote in its statement Wednesday announcing the interest rate hike. It's the second rate hike under Powell, a Republican appointed to lead the Fed by President TrumpDonald John TrumpWhat you need to know about Tuesday's elections Danny Tarkanian wins Nevada GOP congressional primary Laxalt, Sisolak to face off in Nevada governor's race MORE. At this point, there's been little evidence that wage or price inflation is accelerating.

The policy statement bypassed discussion about the tensions over the Trump administration's trade policies, including a decision two weeks ago to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico. For 2020, the Fed foresees a median of 3.4 percent. Should the Fed's expectations prove accurate, its policy would then be meant to slow the economy.

In its updated forecasts, the Fed envisions stronger growth this year - 2.8 per cent, up from the 2.7 per cent it predicted in March.

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United States unemployment dropped to 3.8% in May, its lowest level since April 2000 and one of the lowest levels since the second world war. Inflation by the Fed's preferred gauge would hit its 2 percent target this year and edge up to 2.1 percent over the next two years.

A gradual rise in inflation is coinciding with newfound economic strength. Not since 1969 has the jobless rate been lower.

Beginning in 2008 in the midst of the financial crisis, the Fed kept its key rate unchanged at a record low near zero for seven years. It then raised rates once in 2015, once in 2016, three times in 2017 and now twice this year.

After keeping interest rates low for years to boost growth, the central bank is now moving rates back to what economists say is a neutral position. While the national economy appears to be on solid ground for 2018, the Fed must now consider how growing global trade disputes could slow USA growth.

The economic expansion has survived for nine years and is now the second-longest in history. Canada, the European Union and Mexico have all pledged to retaliate with tariffs on USA imports, which some studies show could cost the US close to 200,000 jobs.

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