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Fed reveals interest rate rise


The Fed raised rates as expected on Wednesday in its first meeting under Chairman Jerome Powell.

The forecast table indicated that growth over the next three years should be greater than expected in December, the unemployment rate will be lower and most importantly, the funds rate is now projected to top out at 3.4%, not 3.1%. Interest rate hike could be the new flavor of the year for the Federal Reserve Board.

"They're seeing it as a risk to the outlook", Mr Powell said at a press conference at the close of the Fed's two-day meeting in Washington.

"The statement would suggest it's open season on the dollar and greenlights sellers to re-engage as the Fed failed to confirm any of the markets' hawkish suspicions", said Stephen Innes, head of Asia-Pacific trading at OANDA.

"He doesn't want to go so fast that he knocks over the apple cart, and I think he also tried to get us to focus on the big picture rather than splitting hairs", McCarthy told FOX Business' Ashley Webster.

By raising interest rates in a timely fashion, the Fed can ensure that we don't end up in that situation.

The Federal Reserve said it had chose to raise the rate by 0.25% to a target range of 1.5% to 1.75%. For now, his Fed is on track to raise rates at least twice more this year and possibly three times.


In its first policy meeting under new Fed chief Jerome Powell, the US central bank indicated that inflation should finally move higher after years below its 2 percent target and that the economy had recently gained momentum. But investors have been skeptical; with the median forecast of 2.1 percent inflation in 2020, Fed officials have put their projections where their mouths are.

Despite Wednesday's move US interest rates are still far lower than the historic norm of about 5 percent. The London Interbank Offered Rate, which is the rate at which worldwide banks lend to each other and serves as a benchmark for lending rates, has risen for more than 30 consecutive sessions and is at its highest since the financial crisis. Beijing said it was prepared to defend its interests as the administration of President Donald Trump prepared to announce tariffs on imports from China.

Inflation has continued to lag the Fed's 2% target rate, but analysts have said they expect wages and prices to increase this year. The challenge for the central bank is to balance low unemployment with the potential for higher inflation.

The financial markets have been edgy for weeks, and Powell's back-and-forth comments have been only one factor. That was an increase of a quarter of a percentage point. At the December meeting, Fed officials estimated 2.5% economic growth this year ahead of the passage of Republican tax cuts and plans to increase government spending. Yellen gave the Feds a reality-check during her three years as chairman.

"Taking trade restrictive measures will not only impede normal global trade order but also cause serious damage to the multilateral trade system", Vice Commerce Minister Wang Shouwen said at a two-day World Trade Organization ministerial meeting that ended on Tuesday.

Other measures of the economy, though, have been more sluggish. The Fed had been gradually reducing its estimate of the long-run neutral fed funds rate since it began publishing its calculations in January 2012.

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