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

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

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

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

The latest increase will bring the benchmark federal-funds rate to a range between 1.75% and 2%.

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. The media forecasts expect the unemployment rate to drop to 3.6% this year, down from March's projection of 3.8%.

The two-year Treasury yield, which is more responsive to expectations for Fed interest-rate policy, rose to 2.578% from 2.539%. Inflation by the Fed's preferred gauge would hit its 2 percent target this year and edge up to 2.1 percent over the next two years.

In comparison, the Reserve Bank kept Australia's official cash rate at 1.5 per cent, its record low for the past 20 months.

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So-called core inflation - which excludes volatile items like energy and housing - is now 2.2 percent, around the level the Fed is looking for. Unemployment is 3.8%, the lowest since 2000, and inflation is creeping higher.

"In view of realised and expected labour market conditions and inflation, the Committee made a decision to raise the target range for the federal funds rate to 1-3/4 to 2 per cent".

Though rates are now roughly positive on an inflation-adjusted basis, the Fed still described its monetary policy as "accommodative", with gradual rate increases likely warranted as a sturdy economy enters a 10th straight year of growth.

Fed officials expect to raise rates two more times this year for a total of four hikes; in March, they expected three rate hikes.

A gradual rise in inflation is coinciding with newfound economic strength.

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Interest rates are going up again as the economy gets hotter. Consumer and business spending is powering the economy, in part a result of the tax cut President Donald Trump pushed through Congress late past year. When the Fed tightens credit, it aims to do so without derailing the economy.

The economic expansion has survived for nine years and is now the second-longest in history.

Some emerging market currencies stayed under pressure on worries higher US rates could prompt fund outflows from emerging markets to the United States.

While many economists worry about a trade war harming growth, the Fed did not mention trade concerns in its statement.

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