Jerome Powell, the new Fed Chairman, acknowledged the strength of the economy by revising the growth outlook higher for this year and the next in his first policy meet, but made a decision to stick to the central bank's earlier plan of three rate hikes this year. 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.
The move opens up the range of interest rates paid by major central Banks: ECB 0%; Bank of England 0.5%; Bank of Japan -0.1%; Bank of Canada 1.25%; Reserve Bank of Australia 1.5%. The Fed asserted that part of the deviation from 2 percent reflects unusual price declines that occurred almost a year ago.
Vitner predicted that the central bank will end up raising rates four times this year despite its forecast for three.
During the announcement, the Fed did not waver from the previously forecast three hikes for 2018, but did provide a steeper outline for hikes in 2019 and 2020, citing an improving economic outlook. The target range for the federal funds rate was increased by a quarter percentage point to 1.75 per cent from 1.5 per cent, the highest since the 2008 collapse of Lehman Brothers Holdings Inc. froze credit markets worldwide.
Newly-installed Fed Chairman Jerome Powell pointed to factors that have boosted the economic outlook in recent months, including "more stimulative" fiscal policy, in the wake of the massive tax cuts Congress passed in December.
"Perhaps most disturbing for the market is moving up the long-run projections of the Fed funds rate, as that will cast doubt as to where rates will eventually peak if the economy proceeds along the path the Fed has projected".More news: 'Dog-in' at NY Airport to Protest Overhead Bin Death
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Unusually low inflation, combined with slow economic growth, helps explain why the Fed has steadily reduced its "longer run" fed funds target since 2012.
The S&P 500 Index of US stocks were higher after Powell spoke, while the yield on 10-year US Treasury notes were around 2.89%, little changed from Tuesday. Officials raised their median estimates for economic growth this year to 2.7 percent, up from 2.5 percent in December. While generally upbeat about the economy's prospects, he also said the Trump administration's trade policy has become a concern for businesses. 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.
In its quarterly forecasts, Fed officials projected the benchmark interest rate would end this year at 2.1% after two more hikes, unchanged from the December forecast, but would rise to 2.9% at the close of 2019, signalling three possible hikes that year. Other social media companies in the US also finished the day lower on concerns that the government might enact new laws affecting their businesses.
The median estimate for United States economic growth for this year rose to 2.7% from 2.5% in December, indicating consumer confidence in the U.S. despite the latest weak readings of retail sales.
The baht would move in line with the economic conditions of Thailand and its trading partners, he said.
But U.S. wage growth has remained sluggish and household budgets are tight.