The US Federal Reserve System (Fed) raised interest rates by 25 basis points, as it has been expected for a while. It is also released that a further interest rate increase will come in 2017.
The Fed raised the interest rates by 25 basis points to a level between 1 and 1.25 percent at the June meeting. There will be another interest rate increase in 2017, and 3% interest rate increase in 2018. The average interest rate expectation of Federal Open market Committee (FOMC) members for 2017 remained at 1.4%. The FOMC’s interest rate decision was voted by 1 to 8. Minneapolis Fed President Neel Kashkari opposed the decision.
After a two-day meeting in Washington, the FOMC made a statement emphasizing that the near-term risks to the economy are balanced, while the committee closely monitors the developments in the inflation.
The Fed has announced that it will narrow the $ 4.5 trillion billow starting from this year. It is stated that the economy is expected to start normalizing this year, depending on where the economy is expected to go.
The 2017 growth expectation for this year has risen from 2.1% to 2.2%. The 2017 inflation forecast was reduced from 1.9% to 1.6%. 2018 and 2019 inflation expectations remained unchanged at a level of 2%.
Inflation is expected to remain below the 2% forecast in the nearest 12-month inflation; however it is expected to stabilize near the target. The FOMC repeated that the gradual interest rate increases would continue if the economy went parallel to the targets.
The US Federal Reserve System (Fed) recently raised its policy rate by 25 basis points to 0.75-1.00 percent in March 2017.
After the decision of the Fed to raise interest rates, the exchange rate decreased from 3.4835 to 3.4785. The Federal Reserve’s decision to raise interest rates one more time in 2017 was effective in the downside of the exchange rate.