US Federal Reserve hikes interest rates by a quarter point

The second rise in three months comes in the wake of steady economic growth, strong job gains and confidence that inflation is rising to the central bank's target.

Photo by: Reuters
Photo by: Reuters

Further rate increases would only be "gradual," the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018.

Updated Mar 16, 2017

The US Federal Reserve raised interest rates on Wednesday for the second time in three months, a move spurred by steady economic growth, strong job gains and confidence that inflation is rising to the central bank's target.

The decision to lift the target overnight interest rate by 25 basis points to a range of 0.75 percent to 1 percent marked one of the Fed's most convincing steps yet in the effort to return monetary policy to a more normal footing.

However, the Fed's policy-setting committee did not flag any plan to accelerate the pace of monetary tightening.

Although inflation is "close" to the Fed's 2 percent target, it noted that goal was "symmetric," indicating a possible willingness to allow prices to rise at a slightly faster pace.


Federal Reserve Chair Janet Yellen delivers semiannual monetary policy testimony during a House Financial Services Committee hearing on Capitol Hill in Washington, US on February 15, 2017. (Rueters)

Further rate increases would only be "gradual," the Fed said in its policy statement, with officials sticking to their outlook for two more rate hikes this year and three more in 2018.

The Fed lifted rates once in 2016.

Business investment "appears to have firmed somewhat," the Fed said in language that reflected a stronger sense of the economy's momentum.

The Fed's projections showed the economy growing by 2.1 percent in 2017, unchanged from the December forecast.

The median estimate of the long-run interest rate, where monetary policy would be judged as having a neutral effect on the economy, held steady at 3 percent.

The unemployment rate Fed officials expect by the end of the year was unchanged at 4.5 percent, while core inflation was seen as slightly higher at 1.9 percent versus the previous 1.8 percent forecast.

Fed Chair Janet Yellen is scheduled to hold a press conference at 2:30 p.m. (1830 GMT) to discuss the policy statement.

Source: 
TRTWorld, Reuters