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US raises benchmark rate by 0.25%

The US Federal Reserve has raised its benchmark interest Rate by 0.25% for only the third time in a decade.

The central Bank voted to raise its key rate target to a range of 0.75% to 1%.

The Fed had been expected to raise rates after a robust February jobs report, solid pay gains, rising inflation and a dip in the unemployment rate to 4.7%.

Federal Reserve policymakers are expected to increase rates a total of three times this year.

The Fed aims to keep the cost of lending between banks within a specified band, which it does by buying or selling financial assets.
It is raising that band by a quarter of a percent.

Fed Chair Janet Yellen said the committee judged that a "modest increase" in the rate is appropriate "in light of the economy's solid progress."

"Even after this increase, monetary policy remains accommodative, thus supporting some further strengthening in the job market, and a sustained return to 2% inflation," she added.

The decision was approved with a 9-1 vote. Neel Kashkari, the head of the Fed's regional bank in Minneapolis, cast the dissenting vote.

This is the second time the Fed has raised rates in three months. It signalled that further hikes this year will be gradual.

Wall Street stock indexes jumped after the announcement, with the Dow Jones Industrial Average up 112 points at 20,950 in afternoon trading.

The US dollar fell about 0.9% against the euro and more than 1% against the pound.

The central bank's outlook for the economy changed little, with officials expecting economic growth of 2.1% this year and next year before slipping to 1.9% in 2019.

Those forecasts are far below the 4% growth that President Donald Trump has said he can produce with his economic programme.

But Ms Yellen told reporters that she didn't believe it is "a point of conflict" between the Fed and the Trump administration.

"We would certainly welcome stronger economic growth in the context of price stability, and if policies were put in place to speed growth... those would be very welcome changes that we would like to see," she said.

Some economists think the next rate hike will be no earlier than June, given that the Fed probably wants time to assess the likelihood that Congress will pass Trump's ambitious program of tax cuts, deregulation and increased spending on infrastructure.

BBC    News.

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US raises benchmark rate by 0.25%


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