Fed expects economic gains to prompt gradual rate hikes

Fed expects economic gains to prompt gradual rate hikes

Fed expects economic gains to prompt gradual rate hikes

U.S. Federal Reserve is expected to continue gradual interest rate hikes this year on the expectation of stronger economic outlook. The Fed's preferred measure of inflation has fallen short of its 2 percent goal for nearly six years, although recent data has shown signs of price pressures building amid a strong economy.

"I still think we're in the realm of a movement in r-star that might be at most a quarter of a percentage point", he said.

The Fed considers a 2-percent annual increase in the personal consumption price index to be the ideal level of inflation to maintain steadily growing economy.

Unemployment and wage growth has been better than what analysts initially projected for 2018.

Officials penciled in three rate moves this year in projections they submitted in December which will be updated next month.

The Fed is aiming to bring interest rates, now set at a 1.25 percent to 1.5 percent range, back up to the historic neutral level. All three are members of the rate-setting committee this year.




USA stocks tanked for two weeks to end January and usher in February with the Dow Jones industrial average and S&P 500 losing 10 and 12 percent of their value each.

However, fears of more rates hikes were allayed on Thursday following comments by St. Louis Fed President James Bullard, who expressed concerns that a "bunch of hikes" this year could turn Fed policy restrictive.

"It may be appropriate later this year to begin an assessment of our current monetary policy framework and alternatives", Mester said in prepared remarks to a conference of central bankers and economists in NY.

Williams said the labor market could continue to pull some people from the sidelines and he expected productivity growth to pick up as investment rebound, while inflation should move up as temporary factors that weighed it down previous year recede.

Noting a rise in business optimism, an increase in business investment, a strengthening labor market and an accelerating pace of economic growth, Quarles said the underlying fundamentals of the US economy are strong.

"It might be early, but it is possible that the investment drought that has afflicted the US economy for the past five years may finally be breaking", Quarles said.

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