US Fed raises interest rates, signals two more rate hikes in 2018

For now, his Fed is on track to raise rates at least twice more this year and possibly three times.

The Fed continued to forecast two further interest rate rises this year and hinted that there could be three, rather than two, to follow in 2019, so long as inflation remained stable in and around its target range of 2%. They know inflation is rearing its ugly head, and the Feds will try to slow it down with another interest rate hike. I think that he's made a very strong case that interest rates are going to need to rise faster.

The dollar struggled against its peers on Thursday after the Federal Reserve maintained the view that it would raise interest rate three times in 2018 instead of the four that some currency bulls had hoped for. Wednesday's action was approved 8-0, with the Fed avoiding any dissents at the first meeting Powell has presided over as chairman since succeeding Janet Yellen last month.

According to Reuters, following the announcement stocks extended their gains, while the dollar fell.

The newly altered 2.9% estimate is still extremely low by historical standards (and roughly the same level as the 10-year Treasury ). But it makes sense as the tax cuts should hype growth in a tight labor market environment and it will be the Fed's job to make sure that faster expansion doesn't get transmitted into too strong inflation. The Fed is expected to effect three more rate hikes this year. Wednesday's forecast put the Fed long-term rate - the point at which its policies are neither boosting the economy nor holding it back - at 2.9 percent. Fed officials project 2-percent GDP growth In 2020.

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Citing improving labor market conditions and inflation nearing 2%, the Federal Open Market Committee (FOMC) on Wednesday voted unanimously to raise the Fed Funds rate from 1.5%-1.75% - the highest since it's been since 2008.

A Republican and former hedge fund executive, Powell is not new to the Fed, having served on the board of governors after being nominated by President Barack Obama in 2012. They now expect the unemployment rate to fall to 3.8 percent this year and 3.6 percent in 2019, a low level by historical standards. Those higher estimates may reflect the expected impact of the additional government spending.

The move to tighten the economy by lifting the benchmark overnight lending rate by a quarter of a percentage point (to a range of 1.5% to 1.75%) was made to keep in line with the central bank's 2% inflation target, given the growing confidence in the current US economy.

POWELL: We're trying to take that middle ground, and the committee continues to believe that the middle ground consists of further gradual increases in the federal funds rate as long as the economy is broadly on this path.

Along with more rapid economic growth, members downwardly revised their projection for the jobless rate and edged up their inflation expectations.

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