In its recent Monetary Policy Announcement, US Federal Reserve has decided to raise the interest rate by quarter of a percent. The Fed Press Brief also informed the market to expect 3 more hikes during the year 2018.
The Federal Reserve came through on a market expected interest Rate hike on Wednesday after its two day policy meeting, raising the GDP forecasts for the year 2018 from 2.1 percent to 2.5 percent. The raise come on the back of a historically low unemployment coupled with the changing inflationary statistics.
US Economy has suffered since the ’07 depression, which was instigated by the fall in housing markets. The Reports warn that rate of growth despite increasing in 2018 is likely to fall during 2019 and 2020 to 2.1 percent and 2 percent respectively though the recent estimates from Fed regarding the economy are much higher than the ones posted after September meeting.
The committee however failed to mention any reason for the suggested growth in the economy. The Fed Chairman and other members have only gone on to suggest that a tighter fiscal policy will help the markets in the long term.
One of the major influencers of policy rate, inflationary estimates were also raised from 1.7 percent to 1.8 percent. The recent growth in the economy has been a result of a rise in consumerism and 16 year low unemployment. Despite the revised estimates, Fed continues to fall immensely short of reaching its 2 percent inflation goal.
The Fed declared the raise as a positive sign for the growing economy which has been uplifted a significant rise in employment prompting spending in the economy. Furthermore, Fed’s decision to raise rates three times in 2018 is at odds with the markets who have shown keen desire for Fed to hold until the unemployment numbers show in inflation and overall behavior of economy.