Markets

Fed raises key rate and sees possible acceleration in hikes

Fed raises key rate and sees possible acceleration in hikes

The Federal Reserve took note of a resilient USA economy Wednesday by raising its benchmark interest rate for the second time this year and signalling that it may step up its pace of rate increases.

"The labour market has continued to strengthen. economic activity has been rising at a solid rate", the central bank's rate-setting Federal Open Market Committee said in its unanimous statement after the end of a two-day meeting.

This marks the seventh time the Fed has hiked rates since 2015, per Reuters, and is part of a slow process to return rates to normal levels.

The Fed expects inflation to overshoot its target faster than it previously thought, prompting it to raise its forecast for rate hikes this year.

Fed Chairman Jerome Powell announced during a press conference that he will hold such briefings after every policy meeting instead of quarterly as from January 2019.

Fed officials project gross domestic product increasing 2.8 percent this year, up from an earlier projection of 2.7 percent.

Economists said the Fed left little doubt that it's prepared to increase the pace of its credit tightening to guard against high inflation later on.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4% in 2020 before dropping to 2.9% in the longer run.




Though rates are now roughly positive on an inflation-adjusted basis, the Fed still described its monetary policy as "accommodative", with gradual rate increases likely warranted as a sturdy economy enters a 10th straight year of growth.

The decision to raise rates comes as the USA unemployment rate hovers at 3.8% - the lowest rate in almost two decades - and inflation, which lagged the Fed's 2% target for years, shows signs of starting to pick up.

The FOMC statement stressed that rising interest rates were unlikely to derail economic growth - which the committee now characterises as "strong" rather than "moderate" - and again made clear the Fed had some tolerance for inflation above its 2 per cent target. Not since 1969 has the jobless rate been lower.

Beginning in 2008 in the midst of the financial crisis, the Fed had kept its key rate unchanged at a record low near zero for seven years.

Eurozone Q1 employment rose 0.4% quarter over quarter, a slight acceleration from the 0.3% quarter over quarter in Q4 last year, but still leaving the annual rate at just 1.4% year over year, down from 1.6% year over year in Q4 last year and versus 1.7% in Q3 2017.

While the course of interest-rate hikes remains gradual, the slightly more aggressive pace shows officials see more urgency to tighten policy, as unemployment already fell in May to the level they had forecast for year-end.

Some emerging market currencies stayed under pressure on worries higher USA rates could prompt fund outflows from emerging markets to the United States. All those countries have vowed to retaliate against any USA tariffs with their own penalties against US goods.

A global trade war would risk cutting into USA economic growth by depressing American export sales and raising inflation by making consumers and businesses pay more for imports.


  • Comcast bids $65 billion for 21st Century Fox assets

    Comcast bids $65 billion for 21st Century Fox assets

    Regulators in this country also have cleared Comcast's $30.7bn offer for the 61% of Sky that Mr Murdoch does not own. But after this latest development, it might not come to pass as Comcast has put together an impressive offer.
    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. All those countries have vowed to retaliate against any US tariffs with their own penalties against USA goods.
    Ancient baobabs are dying and climate change is the chief suspect

    Ancient baobabs are dying and climate change is the chief suspect

    Its leaves, meanwhile, can be boiled and eaten as an accompaniment similar to spinach, or used to make traditional medicines. The southern African countries where the trees died are warming faster than the global average.
  • Trump And Kim Arrive In Singapore For Unprecedented Summit

    Trump And Kim Arrive In Singapore For Unprecedented Summit

    President Donald Trump and North Korea's Kim Jong Un will start their historic summit with a one-on-one session with translators. Brad Adams, Asia director at Human Rights Watch, said it was imperative that Trump bring up rights issues with Kim.
    North Korea Poses No Nuclear Threat, Despite Weapons

    North Korea Poses No Nuclear Threat, Despite Weapons

    Trump, seemingly unprompted, has long wanted to withdraw the US from South Korea, and now he may have found a reason. He said he planned to continue sharing the view with Washington and Seoul . "I'm a realist.
    Uber Suspends Driver After Women Kicked Out Of Car Over Backseat Kiss

    Uber Suspends Driver After Women Kicked Out Of Car Over Backseat Kiss

    Interested in Uber? Add Uber as an interest to stay up to date on the latest Uber news, video , and analysis from ABC News. A lesbian couple who have been dating for two years were booted out of an Uber taxi in NY on Saturday for kissing.
  • Trump says he will stop ‘war games’ with S Korea

    Trump says he will stop ‘war games’ with S Korea

    After the handshake, Mr Trump was asked how he was feeling about the meeting while sitting next to Kim Jong Un . It also noted that Trump softly tapped Kim on the shoulder and seemed to engage in small talk with him.
    Michael Cohen under pressure to cooperate with prosecutors

    Michael Cohen under pressure to cooperate with prosecutors

    Trump's personal lawyer also handled many of his business dealings over the decades. Cohen will hire a new lawyer for the next phase of the probe, the person said.
    Measure to split California into 3 states qualifies for November ballot

    Measure to split California into 3 states qualifies for November ballot

    A controversial plan to divide California into three states has gotten enough signatures to appear on the ballot in November . News and World report showing California ranked 50th for quality of life, 43rd for fiscal stability and 26th for education.
  • Who won in the Trump-Kim summit?

    Who won in the Trump-Kim summit?

    University student Choi Soo-won, 23, said he has his hopes up as President Trump is an "unpredictable" figure, as is Kim. The top USA diplomat was set to arrive in Seoul later in the day, Yonhap news agency reported .
    Farrah Abraham arrested at Beverly Hills Hotel

    Farrah Abraham arrested at Beverly Hills Hotel

    UPDATE at 9:15am PT on 6/13: The Beverly Hills Police Department released the following statement about Abraham's arrest . According to TMZ , Nebraska-born Farrah was booked at 1:48AM Pacific Standard Time and is now being held on $500 bail.
    PM May faces another day of Brexit compromise in parliament

    PM May faces another day of Brexit compromise in parliament

    Her fellow Conservative backbencher Stephen Hammond said: "Parliament must be able to have its say in a " no deal " situation". Brexit protesters outside Parliament House. "The Government's amendment today provides for a meaningful vote".