Fed Announces 0.25% Rate Hike As Expected
by Latisha Liming
The market has been actively waiting for announcement regarding the interest rate hikes. On Wednesday, the Federal Reserve announced that it is increasing the interest rate by 0.25%, much to the glee of the investors. The current interest rate is kept in the range of 1.00% to 1.25%. The Fed announcement showed that there will be a total of three interest rate hikes in 2017 and it is appropriate for the current economic situation.
Following the first rate hike, the market was hopeful that the Fed would move on to raise interest rates. However, the US economic reports showed slower economic growth. This had the market worried because FOMC could change its decision at any time. However, meeting the expectations of the market, FOMC had announced a 0.25% hike just as expected. Earlier after the meeting, the Fed chair had announced that the economic slowdown hasn’t changed the hawkish approach of the Federal Reserve.
In the statement announced on Wednesday, the Federal Reserve has commented that a gradual increase in interest rates is appropriate in the current situation. The labour market continues to tighten and this is expected to increase the inflation rate to 2% over the upcoming months.
Fed also announced that the balance sheet will be trimmed to $4.5 trillion by the end of this year. The committee will begin the balance sheet normalization process soon, as the economy is expected to evolve at the current pace in the next few months.
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