Fed interest rate: Federal Reserve hikes interest rate another quarter point today

Fed interest rate: Federal Reserve hikes interest rate another quarter point today

The dollar approached a three-week high against the yen and stood tall against the euro on Wednesday ahead of the Federal Reserve's policy meeting, which could give clues on how many more rate hikes might come out of the USA this year.

In announcing that its unanimous decision, the Federal Open Market Committee said that its meeting in May indicated that the labor market has continued to strengthen and that economic activity has been rising at a solid rate.

The Federal Reserve raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the USA central bank's shift from policies used to battle the 2007-2009 financial crisis and recession. But that exorbitant rate is likely to go up to 15.57% within two billing cycles, CompareCards says, as lenders pass along the higher rates to clients.

Risks to the outlook remain "roughly balanced", the FOMC said, in spite of concerns that a potential trade war sparked by US President Donald Trump could dent global growth. "I certainly would have expected wages to react more to the very significant reduction in unemployment we've had", he said.

The Fed was widely expected to raise interest rates Wednesday amid strong economic data.

However quarterly economic forecasts show central bankers now expect the rate to end the year at 2.4%, rather than the 2.1% projected in March.

The already historically low unemployment is projected to fall even further, ending the year at 3.6 per cent before settling at 3.5 per cent in 2019 and 2020. The central bank is aiming to keep record low unemployment and a glut of federal spending from pushing inflation beyond the Fed's 2 percent target.

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Even after Wednesday's hike, the real rates in United States are still negative. Even amid concerns about USA trade policy, the Fed raised its forecast for gross-domestic-product growth this year to 2.8% from 2.7%. And if the Fed were to increase rates excessively without having a proper measure of the slack in the labor market, the result would be a curtailment of aggregate demand, pushing the economy into recession. Mortgage loans maintained its steady pace of growth at 4.7% YoY. Hence, we can see the U.S. 10-year yield to enter uncharted territory above 3 percent in medium term.

But for now, the Atlanta Fed estimates the US economy is roaring at a 4.6 percent rate, a level it reached only twice since the recession.

But he said "having twice as many press conferences does not signal anything about the timing or the pace of interest rate changes".

"Is it on a cyclical basis lower as the economy gets hotter and hotter?"

Eurozone growth is slowing down and rising political uncertainty as evidenced by the formation of the Italian government will give the European Central Bank food for thought. "Auto loans growth spiked to 5-year highs with a rise of 7.8% YoY in April".

US central bankers again emphasized on Wednesday that the goal is "symmetric", and they said in minutes of the May meeting that "a temporary period of inflation modestly above 2 per cent" would help anchor long-run inflation expectations around the target.