US Federal Reserve raises interest rates

Roman Schwartz
June 13, 2018

This report, released by Federal Reserve, includes the FOMC's projection for inflation and economic growth over the next 2 years and, more importantly, a breakdown of individual FOMC member's interest rate forecasts.

"Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly", the Fed wrote in its statement Wednesday announcing the interest rate hike.

That implies four total rate increases this year.

The Fed move came after a two-day meeting where its members discussed the robust state of the U.S. economy and the potential impact of a trade war amid rising tension between the USA and its largest trading partners. 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. While the national economy appears to be on solid ground for 2018, the Fed must now consider how growing worldwide trade disputes could slow USA growth. The Fed had said its key rate "is likely to remain, for some time, below levels that are expected to prevail in the longer run".

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Fed says further gradual rate increases will be consistent with sustained economic growth, strong labor market and inflation near 2 percent over medium term. It also forecast an even lower unemployment rate of 3.5% for 2019 and 2020.

U.S. unemployment dropped to 3.8% in May, its lowest level since April 2000 and one of the lowest levels since the second world war. "Economic activity has been rising at a solid rate". It's the second rate hike under Powell, a Republican appointed to lead the Fed by President TrumpDonald John TrumpWhat you need to know about Tuesday's elections Danny Tarkanian wins Nevada GOP congressional primary Laxalt, Sisolak to face off in Nevada governor's race MORE.

Interest rates are going up again as the economy gets hotter. Not since 1969 has the jobless rate been lower.

In a technical move, the central bank also chose to set the interest rate it pays banks on excess reserves - its chief tool for moderating short-term interest rates - at just below the upper level of its target range.

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