US Fed raises key interest rate amid stronger growth outlook

EURUSD Daily

And the rate at which Americans are taking on more debt is rising across the board, according to a recent study from Chicago-based credit bureau TransUnion. This week, Powell presided over a Fed policy meeting for the first time since becoming chairman.

But among Fed officials meeting in Washington Tuesday and Wednesday, Powell says, "There's no thought that changes in trade policy should have any effect on the current outlook".

Naturally, the positive showing also helped to bolster hopes that the Bank of England (BoE) will raise interest rates again in May, shoring up demand for the Pound (GBP) once again.

"So sure were markets that a rate rise would occur today they gave it a near 95% probability".

The Fed's measures of inflation were little changed, helping reassure investors that the USA central bank may not raise rates more than three times this year.

Before the meeting, analysts were split over whether the Fed, which is wary of an early misstep under its new leadership, would raise policy tightening expectations until more price pressures are clearly evident. However, it boosted its 2019 estimate from two rate hikes to three. The yield on the 10-year Treasury note, a benchmark for mortgages and other loans, rose from 2.87 percent to 2.93 percent. And Fed members have at least one good reason to believe now is the right time: Unemployment is approaching a 50-year low, suggesting that one of our most precious resources might be getting dangerously scarce - namely, spare workers.

The Fed has been raising rates slowly since 2015, moving the United States away from the ultra-low levels put in place following the financial crisis.

The quarterly rate forecasts imply an additional rate increase next year than previously expected, even though officials do not anticipate inflation to rise any faster.




In its first policy meeting under new Fed chief Jerome Powell, the USA central bank indicated that inflation should finally move higher after years below its 2 percent target and that the economy had recently gained momentum.

The Fed announced it will raise the benchmark Fed funds rate to a range between 1.5% and 1.75%.

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. The Fed is likely to stick with its three planned rate hikes this year for now, but may hint at a fourth.

"We expect the median fed funds rate (dot-plot average) projection for 2019 to shift up to 2.9% from 2.7%, with 2018 unchanged".

A better-than-forecast acceleration in United Kingdom average weekly earnings encouraged the Pound to US Dollar (GBP/USD) exchange rate to extend its uptrend further.

A rise in oil prices to a six-week high and signs that US inflation remains in check helped reverse a day-long decline in world equity markets Wednesday. Consumer spending, the economy's primary fuel, has slowed this year and has led many economists to downgrade their forecasts for growth in the January-March quarter.

Once its meeting ends at 2 p.m. "That's why we are seeing a bit of a disappointment on the dollar side", said Minh Trang, senior foreign currency trader at Silicon Valley Bank in Santa Clara, California.

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