Federal Reserve Raises Key Interest Rate and Signals More Increases May Come

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Federal Reserve Raises Key Interest Rate and Signals More Increases May Come

It kept borrowing costs that low after the financial crisis to encourage businesses and consumers to spend and grow the economy.

Greg McBride, chief financial analyst for the interest rate website Bankrate.com, said that could "squeeze" families if wage growth remains sluggish.

The increase marks the highest level of interest rates in the United States since 2008.

It's the second rate hike under Powell, a Republican appointed to lead the Fed by President TrumpDonald John TrumpWhat you need to know about Tuesday's elections Danny Tarkanian wins Nevada GOP congressional primary Laxalt, Sisolak to face off in Nevada governor's race MORE.

And a majority of policy makers said they now expect a total of four interest rate increases this year.

The Fed offered an improved forecast for unemployment this year, lowering its forecast to 3.6%.

Along with rising interest rate expectations. Fed Chairman Jerome Powell said at a news conference that the U.S. economy has strengthened considerably since the 2007-08 recession and is in "great shape". Unemployment, now at an 18-year low of 3.8 per cent, would drop to 3.6 per cent by year's end and to 3.5 per cent in 2019 and 2020 - levels not seen in 49 years. After keeping interest rates low for years to boost growth, the central bank is now moving rates back to what economists say is a neutral position. 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. He'll likely address the decision to hike rates and the Fed's views on the overall economic outlook. It then raised rates once in 2015, once in 2016, three times in 2017 and now twice this year. Paychecks aren't soaring, in other words, but at least most Americans are staying ahead of inflation. The average rate for a 30-year fixed mortgage hit a high of 4.8 percent in the last week of may before dropping slightly.

Individual Fed policymakers have expressed concerns about the economic risks of a broad tit-for-tat tariff retaliation, but have said they would not change their policies or forecasts until those risks are realized. Inflation for the next two years is expected to remain at 2.1%, unchanged from the previous forecast.

The Fed said its policy of further gradual rate increases will be "consistent with a sustained expansion of economic activity, strong labour market conditions, and inflation near the Committee's symmetric 2% objective".

ASX futures are down 0.1 per cent, which indicates the Australian share market is expected to open slightly lower, or with little change.

"Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams".

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