Thursday, June 14, 2018

The Fed Hikes Rates

As expected, the Federal Reserve lifted its benchmark federal funds rate by a quarter-percentage point, yesterday, to a range of 1.75 percent to 2 percent. But he biggest news is what it might do over the rest of the year.

By a narrow margin, the Fed projected a total of four rate increases in 2018, instead of three as previously planned. Fed leadership remains closely divided: Eight Fed officials said they expected interest rates to rise at least four times, while seven forecast three rate hikes.

The Fed’s preferred inflation barometer, the PCE index, has already hit the bank’s long-run 2 percent target. Yet the Fed predicts inflation will end up around 2.1 percent by year end, suggesting that they think prices will ease later this year.

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