Fed raises interest rates and signals faster hikes on the way

Fed raises interest rates and signals faster hikes on the way

Fed raises interest rates and signals faster hikes on the way

The US Federal Reserve has raised its benchmark lending rate, the second increase of the year.

The widely-anticipated decision will lift the target for the central bank's benchmark rate to 1.75%-2%, the highest level since 2008.

Fed drops reference from previous statements that it expected rates to be below neutral rate for "some time".

Fed officials also said they expect to raise rates twice more this year, faster than previously forecast.

Fed Chairman Jerome Powell will hold a press conference at the conclusion of the two-day June meeting. And since the Fed started its post-recession rate increases in late-2015, they've coincided with hikes so that the chair has an opportunity to explain the decision. Unemployment is 3.8%, the lowest since 2000, and inflation is creeping higher.

Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate.

Even so, raising rates too quickly could prevent vulnerable Americans and pockets of the country still struggling from reaping the benefits of a strong economy. For 2020, the Fed foresees a median rate of 3.4 percent. The unemployment rate is seen falling to 3.6 percent in 2018, compared to the 3.8 percent forecast in March. Investors had given just over a 91 percent chance of a rate rise on Wednesday, according to an analysis by CME Group.

The Fed's pace of rate hikes for the rest of the year could end up reflecting a tug of war between a sturdy economy and the risks to growth, including from a potential trade war that could break out between the United States and such key trading partners as China, the European Union, Canada and Mexico.

Fed says setting ioer rate 5 basis points below top of target range for funds rate aims to keep market rates well within range. All those countries have vowed to retaliate against any US tariffs with their own penalties against USA goods.

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