Published: Wed, June 13, 2018
Business | By Eloise Houston

Fed raises key rate and sees possible acceleration in hikes

Fed raises key rate and sees possible acceleration in hikes

The Federal Reserve raised USA interest rates again on Wednesday, the seventh increase since 2015 when the central bank resumed raising rates after the last recession. 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.

It is the seventh time the bank has raised rates since 2015. That puts the Fed on track for four rate hikes total in 2018, something the Fed hasn't done since 2006.

Fed Chairman Jerome Powell will hold a press conference at the conclusion of the two-day June meeting. The move reflects the economy's resilience, the job market's strength and inflation that's finally nearing the Fed's target level.

Rates for savers have tended to lag the Fed's hikes.

The new median forecast projects the Fed's benchmark rate at 3.1 percent by the end of 2019, up from 2.9 percent in the previous forecast.

Fed says economic activity rising at a solid rate, previously described growth as moderate.

Interest rates are going up again as the economy gets hotter.

Fed says further gradual rate increases will be consistent with sustained economic growth, strong labor market and inflation near 2 percent over medium term. The unemployment rate is seen falling to 3.6 percent in 2018, compared to the 3.8 percent forecast in March.

Fed says setting ioer rate 5 basis points below top of target range for funds rate aims to keep market rates well within range.

In a technical move, the central bank also made a decision to set the interest rate it pays banks on excess reserves - its chief tool for moderating short-term interest rates - at just below the upper level of its target range.

The policy statement bypassed discussion about the tensions over the Trump administration's trade policies, including a decision two weeks ago to impose tariffs on steel and aluminum imports from the European Union, Canada and Mexico.

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