Fed raises interest by 25 basis points

THE US Federal Reserve yesterday raised interest rates for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank’s target. The decision to lift the target overnight interest rate 25 basis points to a range of 0.75 percent to 1 percent marked one of the Fed’s most convincing steps yet in the effort to return monetary policy to a more normal footing. However, the Fed’s policysetting committee did not flag any plan to accelerate the pace of monetary tightening. While inflation is “close” to the Fed’s 2 percent target, it noted that goal was “symmetric”, indicating a possible willingness to allow prices to rise at a faster pace. Further rate increases would only be “gradual”, the Fed said, with officials sticking to their outlook for two more rate hikes this year and three more next year. The Fed lifted rates once last year. Business investment “appears to have firmed somewhat,” the Fed said in language that reflected a stronger sense of the economy’s momentum. Fresh forecasts released with the statement showed little change from those of the December policy meeting and gave little indication the Fed has a clear view of how Trump administration policies may impact the economy this year and beyond. “With gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace,” the Fed said in language used in previous statements. Its projections showed the economy growing 2.1 percent this year, unchanged from the December.