This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.bbc.co.uk/news/business-46624722
The article has changed 6 times. There is an RSS feed of changes available.
Version 1 | Version 2 |
---|---|
Fed raises rates but cuts 2019 forecast | Fed raises rates but cuts 2019 forecast |
(about 1 hour later) | |
The Federal Reserve has raised interest rates again - but future increases may come at a slower pace. | The Federal Reserve has raised interest rates again - but future increases may come at a slower pace. |
Officials at the US central bank voted to lift the Fed's key interest rate by 0.25%, to a target range of 2.25%-2.5%. | Officials at the US central bank voted to lift the Fed's key interest rate by 0.25%, to a target range of 2.25%-2.5%. |
But estimates released on Wednesday show most members expect two rate increases in 2019 - not three, as previously forecast. | But estimates released on Wednesday show most members expect two rate increases in 2019 - not three, as previously forecast. |
The shift follows a downturn in US financial markets and concerns about slowing growth in the US and abroad. | The shift follows a downturn in US financial markets and concerns about slowing growth in the US and abroad. |
Officials now expect economic growth of 2.3% in 2019, down from the 2.5% they anticipated in September. | Officials now expect economic growth of 2.3% in 2019, down from the 2.5% they anticipated in September. |
Members also said they expect inflation to hover around 1.9% next year, compared to a 2% forecast in September. | Members also said they expect inflation to hover around 1.9% next year, compared to a 2% forecast in September. |
Greg McBride, chief financial analyst at Bankrate.com, a personal finance website, said: "The Fed downshifted their projections of 2019 economic growth, inflation, and interest rate hikes - not in a big way but enough to remove the urgency of repeated rate hikes." | Greg McBride, chief financial analyst at Bankrate.com, a personal finance website, said: "The Fed downshifted their projections of 2019 economic growth, inflation, and interest rate hikes - not in a big way but enough to remove the urgency of repeated rate hikes." |
The Fed has been gradually raising interest rates since 2015, moving the US away from the ultra-low rates put in place during the financial crisis to spur economic activity. | The Fed has been gradually raising interest rates since 2015, moving the US away from the ultra-low rates put in place during the financial crisis to spur economic activity. |
Wednesday's decision, which was widely expected, marked the ninth increase since 2015 and the fourth this year. | |
The moves have made borrowing more expensive, contributing to slowdowns in some sectors, such as housing. | |
With economic growth expected to slow, some worry that further increases risk stifling economic activity. | |
Political independence | |
US President Donald Trump has been among the loudest voices calling on the Fed to hold off on further increases. | US President Donald Trump has been among the loudest voices calling on the Fed to hold off on further increases. |
At a press conference on Wednesday, Federal Reserve Chair Jerome "Jay" Powell defended the Fed's independence, saying that political pressure plays "no role whatsoever" in its discussions or decisions. | |
He said the strength of the economy - which is expected to grow about 3% this year - justified another rate rise, despite recent "cross currents". | |
"We think this move was appropriate for what is a very healthy economy," he said. "Policy at this point does not need to be accommodative." | |
Mr Powell added that the Fed has no plans to change its ongoing reduction of its portfolio of Treasuries and mortgage-backed securities, as Mr Trump appeared to suggest in a tweet this week. | |
Market reaction | |
Shares sank after the announcement, reversing earlier gains. The Dow and S&P 500 fell about 1.6%, while the Nasdaq was down more than 2%. | |
Analysts said the Fed did not appear as concerned about the economy as some investors might have expected. | |
"The downgrade to their 2019 growth forecast is pretty modest," said Brian Coulton, chief economist at Fitch Ratings. | |
"Given the stock market declines and negative international economic news - recognised in the statement - this still points to quite a bit of confidence at the Fed in the ability of the US economy to withstand a few more rate hikes." | |
'Significant uncertainty' | |
In its official statement, the Fed said increases to its benchmark rate would help the US economy sustain its expansion, keep the unemployment rate low and inflation near 2%. | |
However, the Fed qualified its position a bit, noting that "some" further gradual increases would be justified. | However, the Fed qualified its position a bit, noting that "some" further gradual increases would be justified. |
Members also lowered their forecast for interest rates in 2020 and 2021. | |
On average, they now expect the benchmark federal funds rate to hit about 3.1%, down from the 3.4% forecasted in September. | |
Mr Powell cautioned that the Fed does not have a pre-set path, and would be guided by data. | |
"There is significant uncertainty about both the path and ultimate destination of any further rate increases," he said. |