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Federal Reserve Raises Interest Rates in Second Hike This Year

Economic IndicatorsJun 13, 2018 02:00PM ET
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Federal Reserve Raises Interest Rates in Second Hike This Year

Investing.com - The Federal Reserve raised interest rates by a quarter point on Wednesday, its second rate hike this year, and signalled a faster pace of rate hikes this year.

The Federal Open Market Committee increased the overnight funds rate to a range of 1.75% to 2.00%.

"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," The Federal Reserve said in a statement.

Futures traders had seen an around 92.5% chance of a rate increase ahead of the meeting, according to Investing.com’s Fed Rate Monitor Tool.

Members of the rate-setting committee raised their 2018 median forecast for interest rates to 2.4% from a previous estimate of 2.1%, hinting at an additional two rate hikes in 2018. The interest-rate outlook for 2019 was raised to 3.1% from 2.9% in March while 2020's was left unchanged at 3.4%.

"While that move in the median reflected only one participant moving their outlook, it is likely that several of the more influential Committee members now anticipate two second-half hikes," JPMorgan said.

In a sign of confidence in the U.S. economy, members of the rate-setting committee raised their economic growth projection for this year, forecasting U.S. economic growth of 2.8% in 2018, a 0.1% increase from the previous projection of 2.7% in March.

The Federal Reserve also raised its outlook on inflation, forecasting Core-PCE inflation outlook for 2018 at 2.0%, up 0.1% from the previous forecast. While Core-PCE Inflation for 2019 and 2020 was left unchanged.

The central bank's upbeat outlook on inflation comes as figures on Tuesday showed that annual inflation rose by 2.8% in May, while core or underlying inflation rose by 2.2% year-over-year.

According to the minutes from the Fed’s May policy meeting, policymakers are less concerned about inflation rising above the Fed’s 2% target than they are about the rate of inflation dipping again.

The labor market is expected to tighten further in 2018, with the unemployment rate expected at 3.6%, down from a prior forecast of 3.8%. The central bank forecasts the unemployment rate for both 2019 and 2020 at 3.5%, down from 3.6% previously.

Federal Reserve Raises Interest Rates in Second Hike This Year
 

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Gold Follower
Gold Follower Jun 14, 2018 2:16AM ET
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When previously has unumployment rate stayed at full employment levels for 3 straight years? Never...it is against modern economic theories...
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michael hammer
michael hammer Jun 13, 2018 3:40PM ET
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It's like they're trying to crash the economy.
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Sami Awadalla
Sami Awadalla Jun 13, 2018 3:40PM ET
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Hi. Why would this lead to a crash??
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michael hammer
michael hammer Jun 13, 2018 3:40PM ET
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It will increase interest rates on loans. People are less likely to start new businesses, expand current ones or buy a new home.
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Andri Lim
Andri Lim Jun 13, 2018 2:18PM ET
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So dollar Will up?
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Srinivasarao Pureti
Srinivasarao Pureti Jun 13, 2018 2:18PM ET
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Yed
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Srinivasarao Pureti
Srinivasarao Pureti Jun 13, 2018 2:18PM ET
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Yes
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Leon Chen
Leon Chen Jun 13, 2018 2:18PM ET
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wrong, down!
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Alaba Jimoh
Alaba Jimoh Jun 13, 2018 2:13PM ET
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Its time to make some good harvest again.
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Sunny Chase
Sunny Chase Jun 13, 2018 2:08PM ET
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Crash the economy fast, full speed ahead.
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