Hike Interest rates: Federal Reserve United States. America’s central bank has taken another step towards normalizing monetary policy, by increasing interest rates to a 1% to 1.25% range. The US Federal Reserve has pressed on with the normalization of interest rate policy, by hiking borrowing costs for the second time this year. The Fed funds rate is now 1% to 1.25%.The Fed is also broadly sticking to its previous guidance for interest rate rises over the next couple of years. Chair Janet Yellen tried to cool speculation that recent weak inflation might make the central bank more dovish.
The Fed remains confident that the US economy is recovering, saying:
The Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further.Ian Kernohan, senior economist at Royal London Asset Management, says:
“The Fed made little changes in the language or projections for further interest rate hikes. They acknowledged that inflation was running below target, but also that job gains have been solid. We expect another rate hike and some balance sheet normalization before the end of the year.”
In another sign of confidence, the Fed outlined its plans to start selling off some of the assets bought during its stimulus programme.During a press conference; Janet Yellen said she’d not discussed her future with president Trump. She remains committed to serving her full term (to February 2018).
Wall Street took the news in its stride, with the Dow Jones ending the day at a new high thanks to rising financial stocks.The US dollar also strengthened during Yellen’s press conference, as traders anticipated further rate hikes down the line.
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