Fed Raises Rates by 0.25%, Maintains Outlook For 3 Hikes in 2018

Fed Raises Rates by 0.25%, Maintains Outlook For 3 Hikes in 2018

Investing.com – The Federal Reserve approved its third rate hike of 2017, and forecasts further rate hikes despite growing concerns over the slow pace of inflation.

In a move largely expected by financial markets, the policymaking Federal Open Market Committee (FOMC) agreed to raise its benchmark rate target by 0.25% to 1.25%-1.5%, and maintained its forecast for additional rate hikes in 2018.

The “dot plot,” part of the FOMC’s Summary of Economic Projections, indicated that the central bank saw rates rising to between 2% and 2.25% by the end of the 2018, despite concerns over inflation.

With rates raised on Wednesday raised to 1.25-5%, that points to three quarter-point rate increases in 2018.

“On a 12-month basis, both overall inflation and inflation for items other than food and energy have declined this year and are running below 2%,” the FOMC statement noted. “Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.”

In a sign of confidence in the U.S. economy, the rate-setting committee revised upwards its projection for economic growth in 2017 to 2.5%, a 0.1% increase from the previous projection of 2.4% in September, while growth in 2018 was seen at 2.5%, a 0.4% increase from its previous estimate.

Recent inflationary pressures, however, encouraged the Fed to revise upwards its median projection for inflation to 1.7% by the end of this year, up from the 1.6% previously forecast, while the median forecasts for 2018 and 2019 were unchanged at 1.9% and 2%, respectively.

Data released earlier Wednesday showed that, on a year-over-year basis, the, undershot expectations rising just 1.7% in November.

The fell 0.38% to trade at 93.70 while the fell 1.1% to trade at 1.811.

, rose 1.06% to $1,254.80.

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