The big news this week is the raise in interest rates by the Fed. Here’s some information you need to know:
Fed keeps its long-run forecast for economic growth unchanged at 1.8% (source)
- The central bank updated its economic outlook on Wednesday, after the Federal Open Market Committee announced a quarter point hike in its benchmark interest rate, to a range of 2%-2.25%
- The current long run growth forecast matches the June forecast
- The Fed is keeping an eye on the pace of economic growth and the possibility of inflation. It also has to weigh the possible effects of trade turmoil with China and other countries, which could slow global growth
- Many economists see economic growth cooling off next year and beyond.
- The Atlanta Fed last month projected GDP would increase 5% from July – September, on top of 4.1% growth in the 2nd quarter
Fed’s Powell says drop of “accommodative” does not signal any change in path (source)
- The Federal Reserve remains on its policy path despite an indication from the central bank Wednesday that it is no longer taking an “accommodative” stance – Chairman Jerome Powell
- “The change does not signal any change in the likely path of policy, instead it is a sign that policy is proceeding in line with our expectations”
- Still anticipating one more rate hike in 2018, 3 more in 2019, and another 1 in 2020
- Powell emphasized his view on “accommodative” by saying that economic growth remains strong and that further hikes would be appropriate.
Fed still expects one more rate hike in 2018, 3 for 2019 (source)
- The Fed said Wednesday that it sees the federal funds rate at 2.4% by the end of 2018
- The central bank also left its 2019 projection unchanged at 3.1%
- Another rate hike in 2018, and 3 in 2019
President Trump is “not happy” with Fed’s decision to raise interest rates (source)
- “Unfortunately, they just raised interest rates a little bit because we are doing so well. I’m not happy about that. I’d rather pay down debt or do other things, create more jobs.”
- Trump pointed to strength in the economy and falling unemployment rate as reasons to increase rates. But he suggested that there were other ways to capitalize on the windfall from an improving economy.
- “I’m worried about the fact that they seem to like raising interest rates, we can do other things with the money.”
- Trump said that he was “not thrilled” with the rate hikes and reportedly told donors at a fundraiser that Powell had not been the “cheap money” banker he hoped for.