Jobs Report Boosts Case for Interest Rate Hike

Jobs Report Boosts Case for Interest Rate Hike

With the rate at its current level - as of Wednesday, a range of 0.75 percent to 1 percent - the Fed will have nowhere to turn in the event of a sudden recession. The central bank said in a statement that a strengthening job market and rising prices had moved it closer to its targets for employment and inflation.

Also, the Fed wants to increase interest rates so that it has a cushion to lower them again if the economy stalls.

But buried in the details of the Fed decision was something that investors weren't betting on. Minneapolis Fed President Neel Kashkari cast the only dissenting vote, saying he preferred to stand pat.

"We saw the Federal Reserve move - the era of low interest rates is over".

The federal funds rate is the overnight rate on loans between banks, and it's the single most influential interest rate in the US economy, as it has widespread effects on domestic monetary and financial conditions. Growth will be the same in 2018, a slight improvement from the December estimate, but would tick down to 1.9% in 2019.Those projections are well below President Trump's goal of at least 3% annual economic growth.

Fed Chair Janet Yellen pointed to growing faith in the economy's trajectory. By doing so, he was following in the footsteps of his predecessor, Narayana Kocherlakota, a prominent dissenter against rate hikes. "We have confidence in the robustness of the economy and its resilience to shocks".

Some analysts speculated that Fed officials also could indicate a faster pace of rate hikes this year and next. The Dow Jones industrial average, which had been only modestly positive before the decision was announced at 2 p.m.

Well, it looks as if the Fed followed Trump's advice to make money a little bit more expensive.

Prices for benchmark 10-year Treasuries were last down 9/32 to yield 2.615 percent, from a yield of 2.582 percent late on Friday.

In a press conference, Ms Yellen suggested that the Fed's economic and policy outlook had not changed substantially since December and emphasised that she was not going to rush to judgment about the impact of changes to tax and spending policy by Congress. The central bank lifted rates once in 2016. Instead, Wall Street has been sustaining a stock market rally on the belief that the economy will remain durable and corporate profits strong.

The Federal Open Markets Committee projected two more rate hikes this year, unchanged from its previous estimate of three in 2017, and showing that it still expects a slow tightening pace. It continues to forecast two more increases this year as inflation approaches two per cent.

For investors, higher rates won't necessarily bring a slowdown to the stock market.

One rate hike won't change the world but higher rates affects millions of Americans.

The Fed did not move based on any speculation about the economy, she said, and it is "still too early to know how these policies will unfold".

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