US Fed­eral Re­serve raises key in­ter­est rate

The Nation - - BUSINESS -

THE US Fed­eral Re­serve has raised the bench­mark lend­ing rate for the sec­ond time this year, and sig­naled it will be more ag­gres­sive about rate in­creases in 2018 and 2019 amid “strong” eco­nomic growth.

And although he ac­knowl­edged con­cern among busi­nesses na­tion­wide about the un­cer­tainty cre­ated by US Pres­i­dent Don­ald Trump’s abra­sive trade poli­cies, Fed Chair­man Jerome Pow­ell stressed “the US econ­omy is in great shape”.

The unan­i­mous vote the Fed’s rate-set­ting Fed­eral Open Mar­ket Com­mit­tee brings the fed­eral funds rate to a range of 1.75-2.0 per cent, and in­di­cated there would be two more rate in­creases this year and four next, one more than pre­vi­ously ex­pected.

Wall Street was not happy with the ag­gres­sive stance, wor­ried that it sig­naled ris­ing prices. All three ma­jor in­dexes turned neg­a­tive right af­ter the an­nounce­ment and closed even lower.

The Dow Jones In­dus­trial Av­er­age dropped 0.5 per cent and the broad-based S&P 500 shed 0.4 per cent.

Pow­ell down­played con­cerns about ac­cel­er­at­ing in­fla­tion, say­ing the cen­tral bank would not over­re­act to an ex­pected uptick driven by the re­cent in­crease in oil prices.

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