The Fed Raises Interest Rate, Revises Economic Outlook

The Federal Reserve Bank in Washington DC

WASHINGTON, DC–To little surprise the Federal Reserve raised the federal funds rate to a range of 1.5% to 1.75%. It also boosted its forecast for US growth this year and in 2019, predicting an economic expansion of 2.7% and 2.4%, respectively. “The economic outlook has strengthened in recent months,” it said as part of its statement released on Wednesday at the conclusion of its two-day policy meeting.

The Fed expects it will increase rates three times this year — not the four times that many expect will happen — but it also did not rule out four hikes. JP Morgan Asset Management, for example, says that “If fiscal policy stimulus does indeed result in higher growth rates and faster inflation, the Committee median will shift to a total of 4 rate hikes in 2018 as soon as the June FOMC meeting.” And Morgan Stanley Research Chief US Economist Ellen Zentner is looking for two additional hikes in 2019, “where we think the tightening cycle ends at 2.625%,” it said in its summary of the Fed’s announcement.