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US Federal Reserve Bank Raises Interest Rate, Indicating Two Interest Rate Hikes In 2018

Mar 23, 2018

WASHINGTON, March 21 (Xinhua) The Federal Reserve Bank raised its benchmark interest rate by 25 basis points in Wednesday and has signalled two interest rate hikes in recent months on the basis of the "enhanced" economic outlook.

"In view of the realized and expected labour market conditions and inflation, the Fed decided to raise the target range of the federal funds rate to 1.5至1.75%," the central bank said in a statement after the two-day meeting.

Fed officials generally expect the U.S. economy to grow at a faster pace this year and next, as fiscal stimulus and overseas demand rise.

According to the Federal Reserve's Wednesday forecast, the U.S. economy will grow by 2.7% in 2018 and 2019, up from 2.5% and 2.1% per cent earlier than previously forecast.

Fed officials also expect core inflation to rise to 2.1% per cent next year, slightly above the Fed's target and rising from earlier forecasts of 2%.

The unemployment rate for 2018 and 2019 is expected to fall to 3.8%, below 3.9% per cent of the previous forecast.

Fed policymakers still expect a three rate hike in 2018, despite improved economic prospects.

But Fed officials increased in 2019 and 2/2020 over the previous estimate of three in December.

However, Federal Reserve chairman Colin Powell downplayed the importance of these interest rate forecasts and refused to acknowledge that the central bank would tighten pace. "I think, like any set of forecasts, these predictions will change over time."

At the end of the meeting, Powell said at a news conference that these changes will depend on how the economic outlook changes.

"If the economy becomes stronger or weaker, then the path may be slightly less progressive or somewhat gradual," he said. The Wednesday announcement marks the sixth rate hike by the Federal Reserve since the end of 2015, and the first step by Powell in the central bank in February.

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