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GREAT AGAIN: Fed RAISES 2018 Economic Outlook, HIKES Interest Rates

GREAT AGAIN: Fed RAISES 2018 Economic Outlook, HIKES Interest Rates

The number viewing three or fewer hikes as appropriate fell to seven from eight.

The Fed's twin mandate is to bolster employment while controlling inflation, and in the current environment more rate rises appear inevitable.

The central bank raised its key short-term rate today by a modest quarter-point to a still-low range of 1.75 percent to 2 percent. Other changes included referring to "further gradual increases" instead of "adjustments". Previously, the statement made separate references to survey-based and market-based measures of such expectations. "Most people who want to find jobs are finding them, and unemployment and inflation are low".

The median forecast of members of the Fed's rate-setting Federal Open Market Committee (FOMC) puts the benchmark at 3.1 per cent at the end of 2019, up from the previous 2.9 per cent, which signals four hikes next year rather than three. The Fed chief now speaks to reporters after every other policy meeting. In its statement the central bank said that "economic activity has been rising at a solid rate".

The Federal Reserve took note of a resilient USA economy Wednesday by raising its benchmark interest rate for the second time this year and signaling that it may step up its pace of rate increases.

Fed Chair Jerome Powell will discuss the decision at a 2:30 p.m.

They expect the core inflation rate to rise to roughly 2% this year. Most officials expect the Fed would need to raise rates at least three more times next year and at least once more in 2020, leaving rates in a range between 3.25% and 3.5% by the end of 2020, the same end point officials projected in March.

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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.

Eighteen of the 23 dealers participated in the poll, and 15 of those respondents saw two more hikes this year.

But for now, the Atlanta Fed estimates the US economy is roaring at a 4.6 percent rate, a level it reached only twice since the recession. Inflation for the next two years is expected to remain at 2.1%, unchanged from the previous forecast. It is not until the stimulus starts to fade in late 2019 to mid-2020 that a recession is likely, according to half of the respondents to a National Association of Business Economics survey.

U.S. companies are hiring at a rapid pace and consumer and business spending remains healthy, the Fed noted, and core inflation is finally expected to hit the central bank's target of 2 per cent this year. The S&P 500 Index closed 0.4 percent lower in NY, while benchmark 10-year yields ended a little higher at 2.97 percent.

Fast-forward to April of this year when data showed that US job openings jumped to a record high, far outpacing hiring.

USA central bankers again emphasized on Wednesday that the goal is "symmetric", and they said in minutes of the May meeting that "a temporary period of inflation modestly above 2 per cent" would help anchor long-run inflation expectations around the target. That's weaker than the White House's forecast for 3% growth in 2021, suggesting the Fed is less optimistic about the boost from tax cuts.

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