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Financial News: Fed Raises Interest Rates But Forecasts Fewer Rate

Fed Raises Interest Rates But Forecasts Fewer Rate Hikes Next Year

12/19/2018 - 14:28:00 (RTTNews)

(RTTNews) - In a widely expected move, the Federal Reserve announced its decision to raise interest rates by a quarter point on Wednesday.

The central bank said its Federal Open Market Committee decided to raise the target range for the federal funds rate by 25 basis points to 2.25 percent to 2.50 percent.

The Fed's closely watched accompanying statement noted the labor market has continued to strengthen and that economic activity has been rising at a strong rate.

Annual rates of both overall inflation and core inflation were also said to remain near the Fed's 2 percent target, with indicators of longer-term inflation expectations also little changed.

The Fed also reiterated that further gradual increases in interest rates would be consistent with the FOMC's mandate to foster maximum employment and price stability.

However, eagle-eyed Fed watchers will notice the inclusion of the word "some" in the statement regarding further gradual rate increases.

In another indication the Fed plans to raise rates less than previously anticipated, the central bank's projections point to two rate hikes in 2019 compared to the previous forecast for three.

The Fed's median projection for the federal funds rate in 2019 was reduced to 2.9 percent from the 3.1 percent expected in September.

The central bank also lowered its forecasts for real GDP growth in 2018 and 2019 to 3.0 percent and 2.3 percent, respectively. The Fed previously projected 3.1 percent growth in 2018 and 2.5 percent growth in 2019.

While once again calling risks to the economic outlook roughly balanced, the Fed added that it will continue to monitor global economic and financial developments and assess their implications for the economic outlook.

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