Fundamental Comment

Fed raises interest rates, predicts three rate hikes in 2018


The Federal Reserve raised its interest rate by 25 basis points to 1.75 percent, moving in line with forecasts, while expected three rate hikes in 2018.

Today’s rate hike is considered the sixth since the Fed started raising interest rates from near zero in December 2015.

“The economic outlook has strengthened in recent months,” the Fed statement said.

The Fed raised 2017 GDP growth from 2.5 percent in December to 2.7 percent, and increased the 2018 expectation from 2.1 percent to 2.4 percent.

As for inflation, the committee kept the 2018 forecast at 1.9 percent for both core and headline inflation, while moved core personal consumption expenditures higher to 2.1 percent from 2 percent.

“The committee pushed 2019 from two and a half to three increases and 2020 from one and a half to two. The funds rate for 2020 is now expected to be 3.4 percent from the initial 3.1 percent, though the longer run forecast rose just a bit, from 2.8 percent to 2.9 percent,” according to CNBC.

The dot plot showed that policymakers expect another three hikes in 2019, plus two in 2020.

As of 18:19 GMT, the dollar index traded lower at 89.51 from the session’s open at 89.96.

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