Fed raises key lending rate, sees 2 more hikes
WASHINGTON: The Federal Reserve (Fed) on Wednesday raised the key lending rate for the first time this year, citing a stronger outlook for economic growth, and hinted at a slightly more aggressive pace for hikes next year.
Newly-installed Fed chairman Jerome Powell presided over his first meeting, which raised the federal funds rate to 1.5-1.75 per cent.
In its quarterly forecasts, Fed officials project the benchmark interest rate will end this year at 2.1 per cent after two more hikes, unchanged from the December forecast, but will rise to 2.9 per cent at the close of next year, signalling three possible hikes.
“The economic outlook has strengthened in recent months,” said the Fed in the statement at the conclusion of the two-day policy meeting, reflecting the unanimous vote to raise rates.
However, the statement did not discuss the reasons for the rising growth rate, making no mention of the massive tax cuts the United States Congress passed in December, which are expected to juice the economy at least in the short term.
The quarterly rate forecasts imply an additional rate increase next year than previously expected, even though officials do not anticipate inflation to rise any faster.
The Fed’s preferred inflation measure is forecast to end this year at 1.9 per cent and barely move to 2.0 per cent next year.