Markets

Fed hikes rate for second time this year

Fed hikes rate for second time this year

It's the second rate increase of this year and Fed officials anticipate one or two additional hikes before 2019. The Fed has signaled that it will continue to gradually increase rates in response to higher inflation and strength in the US labor market.

Even so, raising rates too quickly could prevent vulnerable Americans and pockets of the country still struggling from reaping the benefits of a strong economy.

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.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. 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 federal funds target rate, which is now between 1.75 and 2 percent, is the highest it's been in almost a decade, indicating that the nation's central bank has confidence the economy will continue to expand. Inflation by the Fed's preferred gauge would hit its target of 2 percent this year and edge up to 2.1 percent over the next two years.




Consumers can expect interest rates to rise for all types of debt. It then raised rates once in 2015, once in 2016, three times in 2017 and now twice this year. When the Fed tightens credit, it aims to do so without derailing the economy.

Fed says raises interest on excess reserves rate to 1.95 pct from 1.75 pct.

While many economists think the current expansion will exceed the 1990's streak, some worry about what might occur once the impact of the tax cuts begin to fade and the Fed's gradual rate hikes begin to curb growth. All those countries have vowed to retaliate against any US tariffs with their own penalties against USA goods.

Fed vote in favor of policy was unanimous.