US Fed raises benchmark interest rate to 2.0-2.25%

US Fed raises benchmark interest rate to 2.0-2.25%

Exterior view of the US Federal Reserve building in Washington, DC. (AFP/KAREN BLEIER)
WASHINGTON: The Federal Reserve raised the benchmark interest rate on Wednesday (Sep 26) for the third time this year but showed no indication it would be more aggressive in efforts to head off inflation.The central bank boosted the lending rate to 2.0-2.25 per cent, a quarter-point increase in the target range.
It once again said "further gradual increases" would allow continued expansion of the economy while keeping inflation around the Fed's two per cent target.However, the closely scrutinised statement from the rate-setting Federal Open Market Committee removed a longstanding phrase which described the Fed's rate stance as providing stimulus to the economy.Fed Chairman Jerome Powell will hold a news conference later on Wednesday to explain the thinking behind the unanimous decision."The committee expects that further gradual increases ... will be consistent with sustained expansion of economic activity, strong labor market conditions and inflation near the committee's symmetric two per cent objective over the medium term," the statement said.
But the statement no longer describes the rate level as "accommodative," while continuing to note the strong gains in economic activity and employment.The Fed has now raised the key rate eight times since late 2015, with one more expected in the final meeting of the year in December.In their quarterly forecast, the central bankers did not signal that they would have to act more aggressively to constrain prices, as the inflation forecast for next year was slightly lower than in June, while the interest rate outlook was unchanged.The median forecast continues to expect the federal funds rate to end the year at 2.4 per cent, implying one more rate hike - as is widely expected in December.
The rate is seen rising to 3.1 per cent in 2019 - the same as the last forecast - which indicates three more moves, as inflation is expected to hold at the Fed's goal of two per cent.The Fed's preferred price index, based on consumer spending, rose 2.3 per cent in the 12 months ended in July, the strongest since March 2012. But excluding volatile food and energy prices, the inflation rate rose 2.0 per cent, which hits the Fed's goal.
Source: AFP/de
 Source : https://www.channelnewsasia.com/news/business/us-fed-raises-benchmark-interest-rate-to-2-0-2-25-10761830