19 January 2018

FED increased interest rates

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The US Federal Reserve has boosted interest rates from 1.25 percent to 1.5 percent in a policy meeting discussing the Fed's predictions and policies for the incoming year of 2018. reports that the interest rate hike was expected. This is the third increase for the year of 2017, part of the Fed's plan to gradually increase interest rates.

Another major announcement from the Fed's conference was their announcement that they were raising their GDP growth estimate from 2.1 percent to 2.5 percent in Q3 2018. Healthy economic growth of 3 percent or higher is expected for Q1, Q2, and possibly Q4 of 2018.

However, growth is expected to settle back down to about 2 percent in 2019 and 2020. Fed Chair Janet Yellen has in the past pointed to aggressive fiscal policy such as the tax reform package aimed at slashing the corporate tax rate currently in the Congressional pipeline accounting for the improved growth.

Unemployment is also expected to drop from 4.1 percent in 2017 to 3.9 percent in 2018. Inflation is also expected to climb, but not to the 2 percent inflation goal that the Fed has been pursuing.

2017 was a banner year for the US stock market, with the S&P 500 gaining 19 percent over the course of the year.

Yellen's term expires in February, and it fell to US President Donald Trump to choose her replacement. He has chosen Jerome Powell, who was seen as a "safe bet" as he has served on the Federal Reserve Board of Governors since 2012. Powell voted in favor of the interest hike.

2017.12.13 / 23:27
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