GREAT AGAIN: Fed RAISES 2018 Economic Outlook, HIKES Interest Rates

GREAT AGAIN: Fed RAISES 2018 Economic Outlook, HIKES Interest Rates

The Federal Reserve took note of a resilient US economy Wednesday by raising its benchmark interest rate for the second time this year and signalling that it may step up its pace of rate increases.

The central bank raised its key short-term rate by a modest quarter-point to a still-low range of 1.75 percent to 2 percent. The Fed has indicated that it is likely to raise rates three or four more times this year.

The federal government drastically upgraded its forecasted 2018 economic outlook Wednesday, saying the USA economy was rising at a "solid" rate; an increase from its previous prediction of "moderate" growth.

"The economy is doing very well", Fed Chairman Jerome Powell said in a press conference after the rate-setting Federal Open Market Committee released its unanimous policy statement after the end of a two-day meeting.

According to CNBC, the Reserve released new data this week showing the GDP forecast rose to almost 3%, up from the previous predictions of 2.7%.

Interest rate hikes will hit consumers in their wallets.

Inflation, which has been mysteriously low during the long economic recovery, has finally passed 2%, the level the Fed considers healthy.

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The Fed said its policy of further gradual rate increases will be "consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective".

Growth is also expected to stay close to nearly 3 percent of GDP through the year, and Fed officials are eager to prevent the economy from overheating. But it noted that inflation was edging near its 2 percent target after years of remaining undesirably low.

A gradual rise in inflation is coinciding with newfound economic strength. Consumer and business spending is powering the economy, in part a result of the tax cut President Donald Trump pushed through Congress late previous year.

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

The Fed offered an improved forecast for unemployment this year, lowering its forecast to 3.6%. It then raised rates once in 2015, once in 2016, three times in 2017 and now twice this year. While the national economy appears to be on solid ground for 2018, the Fed must now consider how growing global trade disputes could slow USA growth. But if it miscalculates and overdoes the credit tightening, it can trigger a recession. It will become the longest if it lasts past June 2019, at which point it would surpass the expansion that lasted from March 1991 to March 2001.

Powell faces a tricky balancing act as the Fed attempts to bring interest rates toward historical averages. Canada, the European Union and Mexico have all pledged to retaliate with tariffs on USA imports, which some studies show could cost the US close to 200,000 jobs.

While many economists worry about a trade war harming growth, the Fed did not mention trade concerns in its statement.

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