Fed moves to prevent U.S. economy from overheating

Federal Reserve chairman Jerome Powell spoke Wednesday about the latest increase in interest rates

Federal Reserve chairman Jerome Powell spoke Wednesday about the latest increase in interest rates

On Wednesday, the United States central bank again raised its benchmark overnight lending rate by another 25 basis points- the fifth rate hike since it ended its ultra-low interest rate policy in December 2016, and setting current rates to a range of 1.50 percent to 1.75 percent.

The Fed on Wednesday raised its benchmark fed funds rate (http://www.marketwatch.com/story/fed-lifts-rates-in-powells-first-meeting-says-outlook-has-strengthened-2018-03-21) as expected and signaled it's still on track to raise rates a total of three times in 2018.

'The Summary of Economic Projections is interesting: although the median forecast of GDP growth was revised higher and unemployment rate was revised lower, the PCE forecast did not change for the next two years, ' said Peng Zhou, managing director of derivatives and quantitative strategy at Sun Life Investment Management.

The move to tighten the economy by lifting the benchmark overnight lending rate by a quarter of a percentage point (to a range of 1.5% to 1.75%) was made to keep in line with the central bank's 2% inflation target, given the growing confidence in the current USA economy.

What's more, seven of the 15 participants on the Fed's policymaking arm favored four rate hikes in 2018, compared to just four members at the end of 2017.

Higher rates are a boon for consumers who have money stashed in savings accounts, which are now offering the highest rates in more than seven years. The estimate for 2019 was increased from 2.1% to 2.4%. But it shifted its plans for next year, calling for three more rate hikes instead of two.

Mkhitaryan: CSKA is very good team with very good experience
Everyone knows that the Berezutski brothers are more than 35-years-old, very experienced and can help them be compact in defence. We are going for over 2.5 goals in the game, and our prediction is available for the best odds of ¾ at BetVictor.

The Fed has been slowly increasing the federal funds rate for the last two years as economic growth has gathered steam. Fed officials predicted the rate also would settle even lower at 4.5 per cent in the longer run. Therefore, inflation should move up closer to 2 percent (the medium term target) as the base effect fades away.

Despite declining 0.8 percent leading up to the Fed's announcement, the price of silver rose from US$16.42 per ounce pre-confirmation to reach US$16.56 after the hike was made official.

Projections for the unemployment rate was lowered to 3.8% this year (from 3.9% in the December forecast) and 3.6% for 2019 and 2020 (from 3.9% and 4.0%, respectively). Officials hoped lower rates would prompt consumer spending and bank lending, among other things.

But so far, Powell said, the Fed has not altered its economic projects because of Trump's tariffs on aluminum and steel or likely trade actions against China.

"At the same time, we want to avoid inflation running persistently below our objective, which could leave us with less scope to counter an economic downturn in the future".

Powell added that the Fed's program for liquidating its assets and reducing its balance sheet - also part of its strategy of easing - "is proceeding smoothly".

Recommended News

  • Family of Stephon Clark killed by police joins rally for reform

    Family of Stephon Clark killed by police joins rally for reform

    Last week, protesters gathered in front of the Sacramento County District Attorney's Office holding their cellphones aloft. Omalu's findings and the family's autopsy, it suggests all the bullets were from behind".
    Apple could be considering iPhone 'hover gestures' and curved displays

    Apple could be considering iPhone 'hover gestures' and curved displays

    Samsung now uses smartphone screens that curve, but its curved screens slope down at the edges, rather than from top to bottom. An Apple spokesperson has declined to comment on the leaked information regarding Apple's two new projects.
    Massimiliano Allegri Set To Replace Conte At Chelsea

    Massimiliano Allegri Set To Replace Conte At Chelsea

    Higuain lost 6-1 versus Spain and had to bear the media pressure from Argentina. I have 25 very good players and I am going to use them all.
  • Fortnite Vending Machine Locations - Map To Find Them All

    Fortnite Vending Machine Locations - Map To Find Them All

    In the aftermath of the Fortnite vending machines going live Fortnite Intel published a map of all the locations found so far. Today's patch is all about content, and it adds an interesting new feature to Battle Royale: vending machines.
    Foxes report gender pay gap

    Foxes report gender pay gap

    The main opposition Labour party, which put out its figures in February, said it pays men slightly higher on average. That pay gap is smaller than most United Kingdom companies, and less than comparable tech companies.
    States, DC file suit against census citizenship question

    States, DC file suit against census citizenship question

    That was on display Tuesday in NY , where Democratic lawmakers and immigrant-rights groups staged a rally to announce the lawsuit. In announcing the lawsuit Tuesday in New York City, Schneiderman called the citizenship question risky and damaging.
  • Spring snow blamed on at least 4 MI  traffic deaths

    Spring snow blamed on at least 4 MI traffic deaths

    An inch or two of snow is possible from Thursday afternoon into early Friday morning, but no major impacts are expected. Accumulations of 3 inches or more are possible north of M-46, including Muskegon, Cadillac and Mount Pleasant.
    Record-setting direct listing makes Spotify a $30 billion firm

    Record-setting direct listing makes Spotify a $30 billion firm

    The public markets will essentially only determine what Spotify shares will be worth when they start trading. At $26.5bn at the end of the first trading day, Spotify ranks in the top 10 largest U.S. tech listings.
    China Services PMI Slides To 52.32 In March - Caixin

    China Services PMI Slides To 52.32 In March - Caixin

    Exports from the sector were helped by the weakness of pound and also strong demand from the rest of the world. This is consecutively for the eighth months that the PMI remained above the mark of 50-point.
  • Brazil's ex-president to be behind bars

    Brazil's ex-president to be behind bars

    However, Lula's legal team was negotiating his surrender with federal police, a source with knowledge of the matter told Reuters. Some observers fear that putting Lula in jail will turn him into a martyr and keep him in the public eye.
    Frozen Four: Late goal lifts Notre Dame to title game

    Frozen Four: Late goal lifts Notre Dame to title game

    Minnesota Duluth, meanwhile, are back to the semis after advancing to the national championship a year ago. We're all right.' And their calmness has probably impacted me into being more calm.
    Countdown for 2019 on, says Shah

    Countdown for 2019 on, says Shah

    Targeting Gandhi and his party, Shah said it was four generations of the Congress that need to give explanations to the country. Prime Minister has wished the party members on the ocassion. "I was listening to Rahul baba ( Rahul Gandhi )".

We are pleased to provide this opportunity to share information, experiences and observations about what's in the news.
Some of the comments may be reprinted elsewhere in the site or in the newspaper.
Thank you for taking the time to offer your thoughts.