Fed rate increase is 3rd this year; foresees 3 more in 2018

Fed Chair Janet Yellen   Mark Wilson  Getty Images

Fed Chair Janet Yellen Mark Wilson Getty Images

Federal Reserve Chairwoman Janet Yellen weighed in Wednesday on the hottest investing topic gripping markets today: Bitcoin.

Given how healthy the economy looks, the central bank lifted its benchmark interest rate a quarter point to a range of 1.25 percent to 1.5 percent, a widely expected move.

Mr Evans, who will not be voting on monetary policy in 2018, framed low inflation as a long-term problem if businesses and households stop believing the Fed is committed to its 2 per cent inflation target.

The Trump administration is pushing through an ambitious $1.5tn tax package that it claims will be paid for by economic growth. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. Some analysts thought the faster growth would cause the Fed to pencil in four rates next year, rather than three.

Still, solid hiring and a low unemployment rate have yet to accelerate wages, a key reason why inflation remains below the Fed's 2 percent target rate.

Officials also boosted their economic forecasts, projecting 2.5% growth in GDP in 2017 and 2018, due in part to planned tax cuts. It's the third time the central bank has inched rates higher this year - and any time it does, it's a closely watched and deeply analyzed move. Lawmakers voted in favour of an amendment to the EU withdrawal bill giving parliament more say over any final exit deal. Stephan Roach, a Yale University senior fellow and the former Asia chairman and chief economist at Morgan Stanley, argued earlier this month that the digital currency was a 'dangerous speculative bubble,' claiming that it will eventually burst.

But the Fed's forecast of three additional rate increases in 2018 and 2019 was unchanged from its projections in September, a sign the tax legislation moving through Congress would have a modest, and possibly fleeting, effect.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability.

Theoretically, there is an unemployment rate below which inflation rises, and while estimates of that "have come down", Ms Yellen said, "it's conceivable that they need to come down even more". "There is less to lose sleep about now than has been true for quite some time, so I feel good about the economic outlook". At some point, those higher rates make stocks and bonds less-attractive investments, and investors want to sell before those assets decline in price.

Trump has made clear that he favors low rates. Rate hikes are usually intended to limit inflation, but Fed officials appear to assume that continued rate increases won't stop inflation from climbing above its current 1.6 percent level. "There's less to lose sleep about now than has been true for quite some time". Goldman also expects the Fed will raise rates three times in 2019, one more than the Fed's September forecast.

"At the moment the U.S. economy is performing well".

The brightening international picture is encouraging more hiring in the United States, even among manufacturers, which have been hurt in the past by global competition.

That follows a solid rebound for the expansion since a disappointing start to 2017.

Yellen said the persistent shortfall of inflation from the Fed's 2 percent goal was the major piece of "undone work" she was leaving for Powell to figure out.

The Fed's course will be charted under new leadership.

World stock markets are subdued ahead of an expected interest rate increase from the Federal Reserve.

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