Fundamental Comment

Fed raises interest rates, predicts two more rate hikes in 2018

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The Federal Reserve raised its interest rate by 25 basis points to 2.0 percent, moving in line with forecasts, while expected another two rate hikes in 2018.

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

Now, policymaker are in favor of four rate hikes this year, instead of three.

The expectation of an additional rate hike is the result of a single vote shifting toward more increases among the officials who comprise the Federal Open Market Committee.

“Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate,” the Fed statement said.

“On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent. Indicators of longer-term inflation expectations are little changed, on balance,” the statement showed.

The Fed raised 2018 GDP growth from 2.7 percent in March to 2.8 percent, and the unemployment rate to fall to 3.6 percent by year’s end, down from a forecast of 3.8 percent in March.

As for inflation, the committee kept the 2018 forecast at 2.1 percent from 1.9 percent

The Fed now predicts inflation will run slightly above its target rate of 2 percent through 2020, at 2.1 percent each year.

As of 18:16 GMT, the dollar index traded slight higher at 93.87 from the session’s open at 93.79.

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