Here’s What The Fed’s Hiked Interest Rate Means

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The Federal Reserve raised its key interest rate by 0.25 percentage point on Wednesday. It is the third rate hike since the financial crisis as the worlds largest economy shows signs of improvement.

If Mr. Trump is watching and considering what the Fed is doing, he might also be coming to understand the role of what is, in principle, an independent US central bank.

Housing starts increased 3.0 percent to a seasonally adjusted annual rate of 1.29 million units last month, the Commerce Department said.

The interest rate hike by the US Fed is not likely to create much volatility in Indian markets and will have only a minimal impact on the RBI’s monetary policy stance, industry bodies said. Trump has also said the Fed’s low-rate policy had propped up a “very false economy”, and that low rates had hurt hurt savers by giving them minimal returns on their savings.

However, the Fed provided little information about the timing of any future interest rate hikes.

Meanwhile, the Fed’s outlook for the United States economy did not alter much compared to earlier statements.

“The simple message is the economy is doing well”, said Yellen in summing up Wednesday’s decision while taking questions from reporters.

Meantime, the core price index for personal consumption expenditure (PCE), the Fed’s preferred indicator for gauging core inflation excluding food and energy, increased 1.7 percent in January from a year ago, moving toward the central bank’s target of 2 percent.

They see the benchmark rate rising to 2.1 percent next year, the same as in the December Summary of Economic Projections (SEP), which would mean another two rate hikes in 2018. “Overall, we continue to expect that the economy will expand at a moderate pace maintaining the solid pace we have seen over the past year”.

Prospects for growth – and inflation – have been bolstered by Donald Trump’s plans for tax cuts and a major programme of infrastructure spending. Three is a rather odd number, however, since it appears to imply a six month window in each year between rate hikes.

Although the precise form of stimulus remains uncertain, Fitch believes that fiscal policy could add up to 0. However, financial experts locally say those in the market for a home should not be discouraged. This follows on the heels of a 25 basis point rise in that target range announced after the Fed’s December meeting.

What about that rosier optimism reflected in surveys of businesses and consumers recently?

Yellen, the normally-cautious economist, sounded a far more confident and upbeat tone than in the past.

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On Wednesday, the Census Bureau announced that US retail sales – a leading indicator of economic growth – only rose 0.1% in February, compared to January.

Fed, Economists and Investors Show Rare Harmony on Rate Outlook

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