Economy

Fed raises interest rates again

Fed raises interest rates again”

In raising its benchmark overnight lending rate a quarter of a percentage point to a range of between 1.75 percent and 2 percent, the Fed dropped its pledge to keep rates low enough to stimulate the economy "for some time" and signaled it would tolerate above-target inflation at least through 2020. USA companies are hiring at a rapid pace and consumer and business spending remains healthy, the Fed noted, and core inflation is finally expected to hit the central bank's target of 2 percent this year.

The central bank also lifted its growth forecast to 2.8 percent this year, up a small amount from its projection of 2.7 annual growth in March.

It was the Fed's seventh rate increase since it began tightening credit in 2015, and it followed an increase in March this year.

This marks the highest level of interest rates in the United States since 2008, although the benchmark rate remains below the historical average. "The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the committee's symmetric 2 percent objective over the medium term", according to its statement following a meeting in Washington.

"Household spending has picked up while business fixed investment has continued to grow strongly", the Fed said.

Powell will face reporters during a press conference at 2:30 p.m. ET. "Economic activity has been rising at a solid rate".

They see another three rate increases next year, a pace unchanged from their previous forecast. The unemployment rate in May was 3.8%, the lowest since 2000 and 1969, while inflation was just below the Fed's 2% target. The Fed is looking for interest rates to rise to 3.4% by 2020, unchanged from the previous forecast. Mr. Powell also serves as Chairman of the Federal Open Market Committee, the System's principal monetary policymaking body.

Core inflation projections, which strip out volatile food and energy prices, is expected to tick slightly higher to 2.0% this year, up from March's projection of 1.9%.

The median estimate for economic growth this year rose to 2.8 percent from 2.7 percent in March, with projections unchanged for 2.4 percent in 2019 and 2 percent in 2020.



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