Date
30 March 2017
Federal Reserve Chair Janet Yellen speaks during a news conference in Washington DC Wednesday after a two-day policy meeting. Photo: Reuters
Federal Reserve Chair Janet Yellen speaks during a news conference in Washington DC Wednesday after a two-day policy meeting. Photo: Reuters

Fed raises rates amid improved US economic outlook

The US Federal Reserve raised its benchmark interest rate for the second time in three months amid increased confidence over the prospects of the world’s largest economy.

In a widely expected move, the central bank on Wednesday announced that it was lifting the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent.

The decision, following a two-day policy meeting, was spurred by steady economic growth, strong job gains and confidence that inflation is rising to the Fed target, Reuters reports.

“We have seen the economy progress over the last several months in exactly the way we anticipated,” Fed Chair Janet Yellen said in a press conference following the policy meeting.

“We have some confidence in the path the economy is on.”

The central bank stuck to its outlook for two additional rate increases this year and three more in 2018. In 2016, the Fed lifted rates once.

Policymakers noted that inflation was now “close” to the central bank’s 2 percent target, and that business investment had “firmed somewhat” after months of weakness.

However, they did not flag any plan to accelerate the pace of monetary tightening, with the policy-setting committee reiterating that future rate increases would be “gradual”.

At the current pace, rates would not return to a neutral level until the end of 2019, Reuters noted.

The US jobless rate is now 4.7 percent, at or near a level consistent with full employment.

The Fed projected that the unemployment rate would fall to 4.5 percent this year and remain at that level through 2019.

The central bank’s projections showed the economy growing 2.1 percent in 2017, unchanged from its December forecast. 

Core inflation was seen as slightly higher at 1.9 percent versus the previous 1.8 percent forecast.

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RC

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