Federal Reserve raises USA interest rates again

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"The overall outlook for growth remains favourable".

Economists said the Fed left little doubt that it's prepared to increase the pace of its credit tightening to guard against high inflation later on.

The central bank said it expects two more rate hikes this year, indicating an increasingly positive view of the economic expansion. The Fed has indicated that it is likely to raise rates three or four more times this year.

The Fed now envisions stronger growth this year - 2.8 percent, up from the 2.7 percent it predicted in March. The Fed's new projection for the pace of rate hikes shows four this year, three in 2019 and one in 2020. "The trajectory of USA inflation or the broader US 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.

U.S. Treasury yields rose after the Fed's decision while U.S. stocks were trading marginally lower and closed down on the day. The dollar.DXY pared losses against a basket of currencies. The Fed chief now holds four such events each year.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run.

That's a welcome change from recent years when Fed policymakers fretted about an inflation rate well below target.

The U.S. central bank is expected to hike its key interest rate another quarter of a percentage point Wednesday.

The Fed's latest projections show unemployment falling to 3.6 percent in 2018.

"The labour market has continued to strengthen. economic activity has been rising at a solid rate", the Fed said in its statement.

The Feds meeting this week is to be followed by policy meetings of two other major central banks — the European Central Bank on Thursday and the Bank of Japan on Friday. "The trajectory of USA inflation or the broader US 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. The action means consumers and businesses will face higher loan rates over time. The statement the Fed issued Wednesday after its latest policy meeting ended suggested that he does. The top interest rate now on offer for a savings account is just 2.05 percent, according to Bankrate, with the average rate only 0.06 percent.

The Fed aims to achieve its mandates of maximizing employment and stabilizing prices by lowering rates to spur growth during times of economic weakness and raising rates to slow growth if the economy threatens to overheat. In the United Kingdom, the Bank has stopped actively buying financial assets and interest rates are up a little from their lows. The step was needed, the Fed said, to be sure rates stay within the intended boundaries.

Trump has slapped tariffs on steel and aluminum imports, has threatened additional tariffs on Chinese imports and has directed his administration to consider further duties on imported cars.

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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