Published: Sat, April 07, 2018
Finance | By Gustavo Carr

US Federal Reserve raised interest rates for the first time this year

US Federal Reserve raised interest rates for the first time this year

He also said he was surprised that wages did not further rise.

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.

Previously, analysts were split over whether the Fed would raise interest rates this soon under a new leadership.

The wild card: Would Jerome Powell, the new Fed Chair, alter the course Janet Yellen had set?

The newly altered 2.9% estimate is still extremely low by historical standards (and roughly the same level as the 10-year Treasury ).

In recent comments, Mr. Bostic noted that while he has been increasing his expectations of the number of rate rises the Fed will need to do this year, Trump administration moves toward more protective trade barriers and the threat of a related trade war had added uncertainty to his outlook.

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Simeon Hyman, Head of Investment Strategy at ProShares, told ETF Trends that Powell expressed a slightly more hawkish policy stance today with perhaps one extra hike over the next couple of years, and an indication that inflation might make it just past the Fed's 2% target to 2.1% next year. Normalisation of interest rates from ultra-low accommodative values means that the Fed would have the option of lowering rates to boost the economy. Powell did little to rattle markets during his first press conference at the helm of the central bank, downplaying the individual forecasts from policy officials. But he said the Fed's regional bank presidents around the country have heard concerns from businesses about the consequences of the tariffs.

"There's no thought that changes in trade policy should have an effect on the current outlook", he said.

His lack of economic formalism came through again as he backed away from being specific about the changing relationship between labor market slack and inflation-a critical issue now for the pace of Fed tightening. It was the sixth quarter point move since December 2015.

"The economic outlook has strengthened in recent months", the policy-setting Federal Open Market Committee said in a statement Wednesday.

Its median projection for GDP rose to 2.7% in 2018 and 2.4% in 2019, up from 2.5% and 2.1%, respectively from the Fed's December projections. Those higher estimates may reflect the expected impact of the additional government spending. "Job gains have been strong in recent months, and the unemployment rate has stayed low". The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. These forecasts represent participants' individual assessments of appropriate policy given their projections of economic growth, employment, inflation, and other factors at a particular point in time.

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