The US Federal Reserve Bank hiked interest rates and revealed its dot plot of rate forecasts. The Bank lifted a key U.S. interest rate to a range of 1.75 per cent to 2 per cent and signaled it will raise the cost of borrowing four times this year. Previously the central bank had forecast three rate hikes in 2018.
The vote was 8-0. While the Fed said monetary policy remains “accommodative,” the central bank dropped longstanding language about rates remaining “below levels that are expected to prevail in the long run.” The change in the policy statement suggests the Fed no longer thinks money is cheap, though senior officials are still uncertain as to just how high they will increase their benchmark rate.
The FOMC left its estimate of what it considers a neutral rate at 2.9 per cent. By the end of 2018 the Fed expects its benchmark rate to average 2.4 per cent. It’s then expected to rise to 3.1 per cent in 2019 and 3.4 per cent by 2020 before eventually declining.
MarketWatch
