Fed raises rate, sig­nals two more hikes likely in 2018

The Myanmar Times - Weekend - - International Business -

THE Fed­eral Re­serve hiked Amer­ica’s bench­mark in­ter­est rate a quar­ter point on Wed­nes­day to 1.75 to 2 per­cent, a move that will likely cause a slight in­crease in mort­gage, credit card, auto and small busi­ness loan rates.

This hike, which was widely ex­pected, is the Fed’s sec­ond of 2018, and the cen­tral bank sig­naled it is likely to do two more in­creases by the end of this year.

The U.S. econ­omy con­tin­ues to strengthen, the Fed in­di­cated, and it no longer needs the his­tor­i­cally low in­ter­est rates that were put in place in the af­ter­math of the fi­nan­cial cri­sis to stim­u­late growth. Un­em­ploy­ment is al­ready at 3.8 per­cent, the low­est since 2000, and the Fed be­lieves it will fall to 3.6 per­cent by the end of the year, which would be the best rate since the 1960s.

The cen­tral bank also lifted its growth fore­cast to 2.8 per­cent this year, up a small amount from its pro­jec­tion of 2.7 an­nual growth in March. U.S. com­pa­nies are hir­ing at a rapid pace and con­sumer and busi­ness spend­ing re­mains healthy, the Fed noted, and core in­fla­tion is fi­nally ex­pected to hit the cen­tral bank’s tar­get of 2 per­cent this year.

“Re­cent data sug­gest that growth of house­hold spend­ing has picked up, while busi­ness fixed in­vest­ment has con­tin­ued to grow strongly,” the Fed wrote in its state­ment Wed­nes­day an­nounc­ing the in­ter­est rate hike. “Eco­nomic ac­tiv­ity has been ris­ing at a solid rate.”

This marks the high­est level of in­ter­est rates in the United States since 2008, al­though the bench­mark rate re­mains be­low the his­tor­i­cal av­er­age.

The big­gest change the Fed made Wed­nes­day was to sig­nal that it in­tends to do two more rate hikes this year, in­stead of just one. That puts the Fed on track for four rate hikes to­tal in 2018, some­thing the Fed hasn’t done since 2006.

While many econ­o­mists worry about a trade war harm­ing growth, the Fed did not men­tion trade con­cerns in its state­ment. The cen­tral bank is an in­de­pen­dent agency, and it has long been hes­i­tant to weigh in on any­thing po­lit­i­cal.

– The Wash­ing­ton Post

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