Skip to main content

Fed raises interest rates, keeps policy outlook unchanged for 2018

Federal Reserve Building in Washington.


U.S. central bank pushes through third rate hike of 2017; Fed continues to forecast three rate increases next year.

The Federal Reserve raised interest rates by a quarter of a percentage point on December 13, as anticipated, but left its rate outlook for the coming years unchanged even as policymakers projected a short-term acceleration in U.S. economic growth.
The move, coming at the final policy meeting of 2017 and on the heels of a flurry of relatively bullish economic data, represented a victory for a central bank that has vowed to continue a gradual tightening of monetary policy.
Having raised its benchmark overnight lending rate three times this year, the Fed projected three more hikes in each of 2018 and 2019 before a long-run level of 2.8% is reached. That is unchanged from the last round of forecasts in September.
“Economic activity has been rising at a solid rate ... job gains have been solid,” the Fed’s policy-setting committee said in a statement announcing the federal funds rate had been lifted to a target range of 1.25% to 1.50%.
Officials acknowledged in their latest forecasts that the economy had gained steam in 2017 by raising their economic growth forecasts and lowering the expected unemployment rate for the coming years.
Gross domestic product is expected to grow 2.5% in 2018, up from the 2.1% forecast in September, while the unemployment rate is seen falling to 3.9% next year, compared to 4.1% in the last set of projections.
But inflation is projected to remain shy of the Fed’s 2% goal for another year, with weakness on that front remaining enough of a concern that policymakers saw no reason to accelerate the expected pace of rate increases.
That means that the Trump administration’s tax overhaul, if passed by Congress, would take effect without the central bank having flagged any likely response in the form of higher rates or concerns of a jump in inflation.
Policymakers do see the federal funds rate rising to 3.1% in 2020, slightly above the 2.8% “neutral” rate they expect to maintain in the long run. That indicates possible concerns about a rise in inflation pressures over time.
As it stands, inflation is expected to remain below the Fed’s target in the near term and is being monitored “closely” by policymakers.
Chicago Fed President Charles Evans and Minneapolis Fed President Neel Kashkari dissented in the Fed’s policy statement on December 13.
The Fed also said that, as of January, it would raise the amount of Treasury bonds and mortgage-backed securities that it would not reinvest on a monthly basis to $12 billion and $8 billion, respectively. That is consistent with its balance sheet reduction plan.




Comments

Post a Comment

Popular posts from this blog

As many as 12 killed in New York’s deadliest fire in decades

More than 160 firefighters helped bring the blaze under control. (Source: Fire Department New York/Twitter) A massive fire ignited accidentally by a three-year-old boy swept through a five-story apartment building in New York, killing at least 12 people including a toddler and injuring four others in the deadliest blaze to hit the city in decades. The fire broke out around 6:50 pm (local time) yesterday on the first floor of the Prospect Avenue apartment in the Bronx borough of the city and spread quickly, officials said, adding that the cause of the blaze is under investigation. “We found that this fire started in a kitchen on the first floor,” fire commissioner Daniel Nigro said. “It started from a young boy, three and a half years old, playing with the burners on the stove. The fire got started, the mother was not aware of it – she was alerted by the young man screaming.” The boy’s mother fled with her two children, leaving the door to the apartment open – allowing t...
Post a Comment
Read more

Ukraine crisis: Exchange of hundreds of prisoners takes place

Ukrainian President Petro Poroshenko attends a ceremony to welcome prisoners of war (POWs), released after the exchange with pro-Russian separatists, upon their arrival at an airport in Kharkiv, Ukraine December 27, 2017. (Source: Reuters)  Ukraine and separatist rebels in the east of the country have exchanged hundreds of prisoners, in one of the biggest swaps since the conflict began in 2014. Around 230 people were sent to rebel-held areas in return for 74 prisoners who had been held by pro-Russia rebels in the Donetsk and Luhansk regions, BBC reported on Wednesday. It was the first swap in 15 months. The release and exchange of prisoners was one of the points in the Minsk peace agreement, signed in 2015. The deal has stalled since and analysts say the swap does not signify wider progress. Both sides continue to hold other prisoners. The number of prisoners swapped was lower than initially announced after dozens of people who were meant to be returned to rebel-held terr...
Post a Comment
Read more

Nepal declares ban on solo, blind and double amputee climbers from Everest

This ban is likely to irk solo mountaineers, who enjoy the challenge of climbing alone. In a bid to prevent accidents, Nepal has banned solo climbers from climbing its mountains, including Mount Everest, reported news agency AFP. Earlier on Friday, the cabinet declared revised regulations of the Himalayan nation’s mountaineering, where banning solo climbers from scaling its mountains was one of the key measures being flagged ahead of the 2018 spring climbing season. The cabinet also declared a ban on double amputee and blind climbers, even though Everest has drawn multitudes of mountaineers wanting to overcome their disabilities and achieve the formidable feat. “The changes have barred solo expeditions, which were allowed before,” Maheshwor Neupane, secretary at the Ministry of Culture, Tourism and Civil Aviation, told AFP. Neupane added that the law was revised to make mountaineering safer and decrease deaths. Earlier in April this year, an experienced...
Post a Comment
Read more