US Federal Reserve Raises Interest Rates For The Third Time This Year Amid Strong Labour Market
Washington, December 15: The US Federal Open Market Committee on Wednesday raised the benchmark interest rate for the third and final time this year but left its rate outlook for the coming years unchanged. The Federal Reserve cited the strong labour market and solid economy and increased the key lending rate to 1.25-1.5 per cent, an increase of a quarter point on the cost of loans for everything from houses to cars. It also indicated it was not likely to be more aggressive next year, at least for now.
The world shares rose to further record highs after the Federal Reserve announced the interest rate hike. The U.S. dollar fell after the increase in interest rates in a widely expected move. The Federal Reserve’s also raised its forecast for GDP growth in 2018 to 2.5% from an earlier forecast of 2.1% in September. The upward revision can be attributed to the economic growth expected from tax reforms by the Trump administration. Reports state that among the many changes proposed to the tax code, the most significant change is a reduction of the corporate tax rate to 21% from 35% at present.
According to a report by PTI, the quarterly forecasts by Fed officials showed no change in the expectations for policy moves in 2018 and 2019, with three rate hikes expected next year and one in the following year, identical to their September projections, indicating they are no more concerned about rising prices. The Fed sees gross domestic product growing 2.5 percent in 2018, up from the 2.1 percent forecast in September.
Fed Chair Janet Yellen said the decision was prompted by the continued strong labour market. “Allowing the labour market to overheat would raise the risk that monetary policy would need to tighten abruptly at a later stage, jeopardising the economic expansion,” Yellen said at a press conference. As per reports, two Fed officials voted against the rate increase, the first time there was more than one dissenter since November 2016.