No shocker for the markets here as The Fed raised interest rates for the seventh time since the financial crisis. The new target range for interest rates increased by .25% to a new range if 1.75%-2%. This is the highest it has been since September of 2008.
All eight of the voting members of the FOMC voted in favor of this decision. The Federal Reserve has stated that in raising the benchmark interest rate, the economy is growing at a “solid” rate and improvement from the May characterization of an economy that is growing at a “moderate” rate. The Fed also cited that there has been a “strong” gain in jobs in recent months, and its data suggests that household spending has increased and fixed investments of businesses are continuing strong growth.
The change in language from the Federal Reserves May report to June report suggests that the Fed officials see monetary policy nearing its neutral rate setting, that is the rate of interest at which the economy experiences full employment and price stability, or 2% inflation.
In its most recent summary of economic projections, the Fed’s outlook for growth and inflation for this year has been raised, and the expectations for unemployment rate have decreased.
Taking a look at employment rates, the Fed officials lowered the median expectation rate for unemployment for the year from 3.8% to 3.6% in March. The rate has also been lowered from 2019 to 2020 from 3.6% to 3.5%.
The Fed now forecasts an economic growth of 2.8% in 2018, raising previous year predictions by 0.07%. The expected growth rate of the U.S. economy for 2019 is 2.4% and 2% for 2020.
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Fed hikes rates, signals two more for 2018
The Fed hiked rates and updated its forecasts…