Silver Price Inches Up After Fed Raises Interest Rates

Federal Reserve chairman Jerome Powell

"Fiscal policy has become more stimulative".

The move, the central bank's first major decision under new Chairman Jerome Powell, was widely expected as the US economy continues to strengthen and stock markets remain near record highs. While this might seem daunting for the average consumer with debt or mortgages, the increase is actually a sign of continued health and strength in the economy.

Some investors had speculated that Powell might move to impose his mark on the Fed by signaling a faster pace of rate hikes for 2018. Powell explained that while the unemployment rate has come down from the highs of the 2008 recession, inflation has not gone up, indicating that the relationship between inflation and unemployment-as captured by the Phillips curve-has weakened.

The Fed raises interest rates, more USA tariff announcements loom, and profits at Chinese banks are set to surge.

Powell justified the Fed keeping its inflation forecast the same by noting that price pressures have been weak for years. They now point to at least three rate hikes this year and if only one member switched from three to four, we would be looking for four hikes.

The Fed is expected to lift its benchmark overnight lending rate by a quarter of a percentage point to a range of 1.50 percent to 1.75 percent at the end of a two-day meeting on Wednesday.

Currently, US inflation is running at 2.2% (for the year to February) which is slightly above the Fed's target of 2%.

A healthy job market and a steady if unspectacular economy have given the Fed the confidence to think the economy can withstand further increases within a still historically low range of borrowing rates.




As the additional stimulus is likely driving more Americans into an already tight labor market, inflation is also predicted to edge higher.

However, the range of estimates for the federal funds rate reveal officials are split nearly exactly down the middle, with eight expecting no more than three rate hikes this year and seven projecting four moves or more.

Chairman Jerome Powell, picked by Trump to lead the US central bank, said policy makers had not altered their economic outlook following the president's announcement of trade tariffs on steel and aluminum and threats of measures against Chinese goods.

At the same time, it increased its estimate for rate hikes in 2019 from two to three, reflecting more optimistic expectations for growth and low unemployment.

There are also other changes in the Fed's statement. That's forecast to pick up to 8.1 percent in 2018 as rising global interest rates boost margins.

CHINA TRADE: China's Commerce Ministry said it would take "all necessary measures" to defend China's interests if President Donald Trump targets China for allegedly stealing American technology or pressuring USA companies to hand it over.

In his news conference, Powell left the door open to more or fewer than three increases this year, depending on economic conditions. The US is projected to grow at 2.7 per cent in 2018, up from 2.5 per cent projected in December. The fed funds rate, for example, topped out at 5.25% at the height of the last economic expansion from 2001 to 2007. The median estimate of the GDP growth for 2020 is also unchanged and remains 2%.

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