Published: Wed, June 13, 2018
Markets | By Otis Pena

Fed hikes rate for second time this year

Fed hikes rate for second time this year

The Federal Reserve is widely expected to announce in a statement at 2 p.m. ET that it made a decision to raise interest rates.

The central bank also lifted its growth forecast to 2.8 percent this year, up a small amount from its projection of 2.7 annual growth in March. The central bank is aiming to keep record low unemployment and a glut of federal spending from pushing inflation beyond the Fed's 2 percent target.

This marks the highest level of interest rates in the United States since 2008, although the benchmark rate remains below the historical average. However, the focus will be on the updated economic projections and the dot diagram, which will reveal the expectations of the number of rate hikes in the remainder of the year. US 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.

Jerome Powell, Chairman of the Federal Reserve System, will be delivering his remarks at a press conference following the 2-day meeting of the Board of Governors.

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Along with rising interest rate expectations. The rate is estimated to fall 3.5% next year, through to 2020, down from the previous forecast of 3.6%. Inflation expectations are slightly higher this year compared to March's forecast of 1.9%. Inflation for the next two years is expected to remain at 2.1%, unchanged from the previous forecast. Estimates of the long-run sustainable unemployment rate were unchanged at 4.5 percent.

On inflation, policy makers forecast a slight overshoot of their target starting in 2018 at 2.1 percent, and running through 2019 and 2020, compared with a 2020 overshoot in March's projections. The Fed's preferred price gauge - the Commerce Department's personal consumption expenditures index - rose 2 percent from a year earlier in March and April, after spending most of the past six years below it.

FILE PHOTO: Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington, U.S., March 21, 2018. The committee's forecast for the long-run sustainable growth rate of the economy held at 1.8 percent, suggesting policy makers are skeptical of the effect of tax cuts on the economy's capacity for growth.

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