Federal Reserve raises key interest rate

Federal Reserve raises key interest rate

In its first policy meeting under new Fed chief Jerome Powell, the United States central bank indicated that inflation should finally move higher after years below its 2 per cent target and that the economy had recently gained momentum.

Fed policymakers still envisioned three rate hikes in 2018 despite of improved economic outlook, according to the median forecast for interest rates.

Decision: Fed funds rate target range increased to 1.50% to 1.75%. An upside worry for inflation could be wage rises against a backdrop of near full employment (4.1%).

A healthy job market and a steady if unspectacular economy have given the Fed the confidence to think the economy can withstand further increases within a still historically low range of borrowing rates.

Just focusing on the median of Fed officials' forecasts for interest rates, as Mr. Powell emphasized in his news conference, can mask the degree of the shift.

Bond yields rose and stocks held on to much of their gains after the Fed's announcement, which was widely expected. "The long term average real return on a USA ten year treasury bond runs around 2.5%". But it makes sense as the tax cuts should hype growth in a tight labor market environment and it will be the Fed's job to make sure that faster expansion doesn't get transmitted into too strong inflation. Officials continued to project two more rate hikes in 2018, followed by three moves in 2019 and two further increases in 2020. Before that, the benchmark rate was kept near zero to boost the economy after the Great Recession. So Powell's first meeting as the leader of world's most influential bank has investors nervous.

The Federal Reserve is the central bank of the U.S. It oversees 12 district banks, which together are responsible for the monetary policy of the U.S. This was also seen in upgrade projections for real GDP growth in the Survey of Economic Projections.

What does the hike mean for mortgage rates?

"The economic outlook has strengthened in recent months", the USA central bank said in a statement which followed its two-day meeting.

"This a new Fed chairman starting with a bit of a hawkish tone as he takes leadership".

In December, the Fed predicted U.S. gross domestic product (GDP) to grow 2.5 percent this year, 2.1 percent in 2019 and two percent in 2020.

A 10-year rate at 2.91 percent is "seriously mispriced given the Fed's dot plot forecast", Brusuelas said.

However, that rate is likely to remain under traditional levels for some time, it said.

The financial markets have been edgy for weeks, and Powell's back-and-forth comments have been only one factor. Although the growth rates of household spending and business investment appear to have moderated earlier this year, gains in the fourth quarter were strong and the fundamentals underpinning demand remain solid, he said.

Related news:

Hot News

isis-killer-beheading-video-story-top Rift among Syria's Islam Army rebels delays evacuation from Damascus' Douma district
Apr 07, 2018 - 00:43
It is also unclear whether all of the Army of Islam fighters have agreed to leave and how long the evacuations will take. However, the Syrian Observatory for Human Rights monitoring group on Tuesday said the reports were false.

isis-killer-beheading-video-story-top Jersey Shore relationship status: Who's single and who's taken?
Apr 06, 2018 - 04:19
Vinny and Pauly are still the bachelors, while The Situation dealt with some serious legal issues after Jersey Shore ended. The couple were joined by Jersey Shore's resident meatball Nicole "Snooki" Polizzi and Sophie's castmate, Nathan Henry .

isis-killer-beheading-video-story-top Mexico presidential frontrunner blasts Trump call for border troops
Apr 06, 2018 - 04:18
Ricardo Anaya, the second favorite in most polls, said that Trump's "hostile act" required "a quick and energetic answer". The front-runner in the Mexican presidency, Andres Manuel Lopez Obrador, weighed in on the issue in a tweet .

isis-killer-beheading-video-story-top Missing CDC worker found dead two months later
Apr 06, 2018 - 04:14
WSB-TV reported that the esteemed doctor had texted his mother at 5:21 a.m. and then called her at 9:12 a.m. on Feb.12 . Atlanta police responded by doubling down on their version of events, citing the CDC as the source of the information.

isis-killer-beheading-video-story-top Fortnite: 'Battle Royale' adding loot Vending Machines
Apr 06, 2018 - 04:13
Vending Machines will host 3 items, with one item purchasable by wood, stone and metal each. Here's a map of all the Fornite vending machine locations from our friends at PC Gamer.

M5.3 Temblor Shakes Southern California Area, No Damage So Far Reported
Apr 06, 2018 - 04:12
One resident near Beverley Hills said she could feel the ground "rolling". "We live in quake country", Kondo said. Sign up for our breaking news email newsletter: When major local news happens, you'll be the first to know.

isis-killer-beheading-video-story-top Nokia launches Nokia 6, Nokia 7 and Nokia 8 in India
Apr 05, 2018 - 01:35
Adding to the premium feel of the phone is the lack of a physical button on the front and the addition of wireless charging. To top it off, the Nokia 6 is built with Series 6000 aluminium body, just like the old Nokia , this one's tought too.

isis-killer-beheading-video-story-top Fighters begin leaving last rebel pocket of Syria's Eastern Ghouta
Apr 05, 2018 - 01:33
Russia's military also said Sunday that a preliminary agreement has been reached on the evacuation of Army of Islam fighters. Tens of thousands of people have left Eastern Ghouta in recent weeks, although many civilians remain.

isis-killer-beheading-video-story-top 4 crew members feared dead after Marine helicopter crashes in California
Apr 05, 2018 - 01:30
The aircraft is the " Marine Corps' primary heavy lift helicopter and has been in service for over 30 years", the website states. The CH-53E Super Stallion crashed Tuesday in a desert area just outside El Centro, near the U.S. -Mexico border.

isis-killer-beheading-video-story-top Spotify share price drops on first day of trading
Apr 05, 2018 - 01:28
At $26.5bn at the end of the first trading day, Spotify ranks in the top 10 largest USA tech listings. Spotify now has a higher market value than Snapchat owner Snap, which went public previous year .

isis-killer-beheading-video-story-top Prince Philip in 'good spirits' after hip surgery
Apr 05, 2018 - 01:27
Very last June, Prince Philip put in two nights in hospital as a "precautionary measure" to its treating an undisclosed infection. He has missed a series of engagements and events over the last month, including the recent Easter Sunday service at St.

isis-killer-beheading-video-story-top As Predicted, Chinese Space Lab Falls From The Sky
Apr 05, 2018 - 01:26
Such a practice, frowned upon in the worldwide space community, has been written off as a major blot on China's space program . The Chinese government told the U.N.in May 2017 that its space lab had "ceased functioning" in March 2016.

isis-killer-beheading-video-story-top Mexican Government: Migrant Caravan was Previously Unimpeded Event
Apr 04, 2018 - 02:01
Cash cow Nafta is in play, as is foreign aid to Honduras and the countries that allow this to happen. Immigration officials were registering the Oaxaca group.

isis-killer-beheading-video-story-top U.S. environment agency chief under investigation
Apr 04, 2018 - 01:59
EPA spokesman Jahan Wilcox has said the arrangement was not a gift and the lease was "consistent with federal ethics regulations". Sydney Hupp spent four months previous year as an "executive scheduler" for Pruitt, according to her LinkedIn profile.

isis-killer-beheading-video-story-top Max Holloway will fight for UFC Lightweight title this Saturday
Apr 04, 2018 - 01:58
But with just six days notice to get ready, a cut down to 155 pounds is still going to be severe for the Hawaiian champ. Per White, Ferguson is expected to lose his interim title, which he won by defeating Kevin Lee at UFC 216 in October.