Fed raises short-term interest rates; signals more hikes on horizon

Fed raises short-term interest rates; signals more hikes on horizon

The FOMC is scheduled to next meet on May 1-2.

Wednesday's rate hike is the sixth time the Fed has lifted interest rates since the economy collapsed in 2008.

Officials also increased their expectations for economic growth this year in the United States, declaring that "the economic outlook has strengthened in recent months". The dollar has been stuck in a trading range as investors wait to see whether the Fed will forecast four rate increases this year, instead of the median three seen in December's quarterly forecast. The actions mean consumers and businesses will face higher loan rates over time.

The unanimous vote was the first under new Fed Chairman Jerome Powell and affirmed that Powell will stick to the path set by his predecessor, Janet Yellen, of gradually scaling-back economic stimulus.

The Federal Reserve was forced to make several changes to fiscal policy to balance what caused a global recession - five instances of jacking up interest rates to inject increased strength into the Dollar, like how bodybuilders inject steroids into muscles to compete with others. The reason for this widely expected rate hike is historically low unemployment rate in the U.S. and the confidence in the growth of the USA economy, which is picking up strongly.

The Fed expects that the job market will remain strong. Officials raised their median estimates for economic growth this year to 2.7 percent, up from 2.5 percent in December. The longer run projection rose to 2.9 percent from 2.8 percent. In addition, the already historically low unemployment rate is seen falling even further, ending next year at a stunning 3.6 percent, according to the quarterly Summary of Economic Projections.

Similarly, the Fed forecast the jobless rate to fall to as low as 3.6% in 2019 from the current rate of 4%.

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Officials' growing optimism tracks with the expectations of many Wall Street analysts. U.S. Treasury yields fell and then recovered. That is the rate that is neither boosting nor tightening economic conditions. He said there's no reason to believe that's going to change soon.

In February, 313,000 jobs were added to the economy - the biggest increase in 1 1/2 years - and the unemployment rate held steady at 4.1 percent.

A portion of the voting membership of the committee rotates every year among the Fed's regional bank presidents.

The FOMC, or Federal Open Market Committee, of the Federal Reserve Bank has eight active, voting members.

The rupee, which has strengthened a bit lately, came under pressure post the hike and is now hovering somewhere around 64.50 levels against the U.S. dollar, in the fourth quarter of this fiscal year.

For years after the financial crisis, the Fed raised rates slowly to keep the economy humming. The central bank says it expects inflation to "accelerate over the next few months" on an annual basis. Interestingly, core inflation projections have nudged up for the next two years. The increase represents that uplift in optimism. The statement said that household spending and business investment "have moderated" from strong fourth-quarter readings. Wage growth appears to be improving, but the signs are mixed.

Information for this article was contributed by The Washington Post.

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