Federal Reserve expected to boost key interest rate

Federal Reserve expected to boost key interest rate

The Federal Reserve raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the US central bank's shift from policies used to battle the 2007-2009 financial crisis and recession. USA companies are hiring at a rapid pace and consumer and business spending remains healthy, the Fed noted, and core inflation is finally expected to hit the central bank's target of 2 percent this year.

It was the Fed's seventh rate increase since it began tightening credit in 2015, and it followed an increase in March this year.

Besides raising its projection for rate increases this year from three to four, the Fed removed a key sentence from the previous statement that had been viewed as foreseeing a need to keep rates low for an extended period.

We are closing into the FOMC's June policy decision and as the clocks tick closer to the decision timing, following are the expectations as forecasted by the economists and researchers of 8 major banks along with some thoughts on the future course of Fed's action.

The Federal Open Market Committee indicated that even though it's stepping up the pace of interest-rate hikes, economic growth should continue apace.

Rates for savers have tended to lag the Fed's hikes.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run.

Consumers can expect interest rates to rise for all types of debt.

Powell faces a tricky balancing act as the Fed attempts to bring interest rates toward historical averages.

The unemployment rate is 3.8%, the lowest since 2000 and tied for the lowest reading since 1969.

Rates for conventional mortgages are likely to see more gradual change.

In a technical move, the central bank also made a decision to set the interest rate it pays banks on excess reserves - its chief tool for moderating short-term interest rates - at just below the upper level of its target range.

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