Fed raises target rates by 25 bps

March 21, 2018

Based on data collected by The Federal Reserve since the Federal Open Market Committee met in January indicates that the US economy has shown improvement with activity on the rise. Labor market continued to strengthen while economic activity has risen at a moderate rate. Unemployment rate stayed low in recent months.

Data suggests household spending and business fixed investment growth rates have moderated from their strong fourth-quarter readings.

Despite continuing improvement in economic activities, both overall inflation and core inflation continued to run below 2 percent. “Inflation on a 12 –month basis is expected to move up in coming months and to stabilize around the Committee’s 2 percent objective over the medium term” the report stated. The committee is anticipating “further gradual”  adjustment in its monetary policy while it is also expecting labor market conditions to remain strong.

Given realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds to 1-1/2 to 1-3/4 percent. “ In determining the timing and size of future adjustments to the target range for the federal funds rate, the committee will assess realized and expected econonmic conditions relative to its objectives of mazimum employment and 2 percent inflation.”

The Committee exects economic conditions will evolve to warrant gradual increases in the federal funds rate. The Committee noted, “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”


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