Fed hikes as 'dot plot' shifts upwards

US Federal Reserve nudges up interest rates again, expects more to come

Powell was appointed in October to replace former chair Janet Yellen.

Policymakers also signalled they would increase rates twice more this year, while raising the forecast for rate hikes in 2019.

"The guidance in terms of the future rate hikes is a touch more hawkish than originally expected".

"We expect the prospect of a trade war between the United States and other economies to put a floor under gold prices in the short term, but ultimately we think that Fed tightening will prove too strong a headwind", Capital Economics analyst Simona Gambarini told the Reuters Global Metals Forum. Interest rate hike could be the new flavor of the year for the Federal Reserve Board.

Powell avoided attempts to get him to comment on specific aspects of trade or fiscal policy, but he noted the likely growth boost from the recent tax cuts, and said there are aspects of the package that could help raise the potential growth rate.

"The labour market has continued to strengthen and that economic activity has been rising at a moderate rate".

When mortgage payments go up and credit card interest rates spike, something else in the family budget has to give.

The latest set of quarterly forecasts forecasts showed that policy makers were divided over the outlook for the benchmark interest rate in 2018.

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%. But it shifted its plans for next year, calling for three more rate hikes instead of two.

In its first policy meeting under new Fed chief Jerome Powell, the US 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 estimates for inflation excluding food and energy, which officials see as a better way to gauge underlying price trends, rose to 2.1% in 2019 and 2020 from 2% seen in December. Unemployment is now expected to fall to 3.8 percent this year and 3.6 percent in 2019, which would be the lowest level since 1969. It is, after all, no secret that private corporations attracted by ultra-low interest rates had heavily loaded up on debt over the last decade.

An increase in the Fed's benchmark federal funds rate typically leads to higher rates for consumers and businesses. Some now envision an annual growth rate of just 1.7 percent for the quarter. China said it was prepared to defend its interests as the administration of President Donald Trump prepared to announce tariffs on imports from China.

"A higher yen is seen weighing on exporters", it added. But subsequent reports on wages and inflation have been milder, and the markets appear to have stabilized. This could have served as the trigger for a lot of foreign funds and companies to exit the country and return once the economy has stabilised.

Oxford Economics chief Asia economist Louis Kuijs, said: "The key risk is that it does not end with this modest baseline scenario".

So far, the Fed has been moving gradually to tighten monetary policy to prevent the world's largest economy from overheating.


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