Federal Reserve hikes key interest rate for second time in 2018

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It was the Fed's seventh rate increase since 2015, and it followed an increase in March this year.

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.

The central bank raised its key short-term rate by a modest quarter-point to a still-low range of 1.75 percent to 2 percent. "Most people who want to find jobs are finding them, and unemployment and inflation are low". "Powell seems comfortable exploring the lower reaches of the unemployment rate given few indications it is resulting in stronger inflation pressures".

The Federal Reserve is guiding a USA economy that is as close to ideal as it could have dreamed a decade ago, when the darkest days of the recession forced it to take big risks to protect workers, banks and economies around the world from further devastation.

Interest rates are going up again.

At a news conference, Powell sought to portray the Fed's actions as evidence mainly that the economy is doing well and not that the central bank is eager to accelerate its rate increases.

They see another three rate increases next year, a pace unchanged from their projections in March. The Fed previously nudged rates up in March. "The trajectory of United States inflation or the broader USA economy would likely need to change materially for the FOMC to deviate from that path", said Aaron Anderson, senior vice president of research at Fisher Investments.

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The yield on the benchmark 10-year Treasury note rose for a fourth consecutive trading session to 2.979% from 2.959% Tuesday. The dollar pared losses against a basket of currencies.

The Fed announced the rate rise at the close of a two-day meeting in Washington. The Fed chief now holds four such events each year.

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. Inflation for the next two years is expected to remain at 2.1%, unchanged from the previous forecast.

Officials lowered their jobless-rate estimates after unemployment fell to 3.8 per cent as of May, matching April 2000 as the lowest reading since 1969.

"Economic activity has been rising at a solid rate", the FOMC said in its statement. The Fed is raising rates gradually to keep the economy in check as inflation creeps higher and the job market grows even tighter. Investors had given just over a 91% chance of a rate rise on Wednesday, according to an analysis by CME Group. The stance of monetary policy remains accommodative, thereby supporting strong labour market conditions and a sustained return to 2 per cent inflation. Rates for auto loans and variable-rate mortgages are also likely to increase. 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.

Ian Shepherdson, chief economist at Pantheon Macroeconomics, said before the Fed made its announcement that policymakers are "scared of future inflation risk".

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