The US Federal Reserve paused its interest-rate hiking spree on Wednesday, avoiding what would have been an 11th consecutive increase. &nbsp;According to CNBC, the Fed was analysing the impact of the previous 10 increases on the economy, while leaving the rates unchanged at 5-5.25 per cent. It also added that further interest rate hikes were likely later this year, as the Fed struggles to achieve its inflation target of 2 per cent.

“We have raised our policy interest rate by five percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” Fed Chair Jerome Powell said at a press conference on Wednesday.

<h2>Is inflation under control in US?</h2>

The decision made by Federal Reserve's Federal Open Market Committee (FOMC) indicates a shift in its perspective on inflation. In June of last year, inflation reached a 40-year high of 9.1 per cent due to surging food and energy costs. However, inflation has since declined to 4 per cent in May, the lowest since April 2021.

In a statement, the FOMC explained that maintaining the target range for interest rates during this meeting would allow the committee to evaluate additional information and its implications for monetary policy. The committee will continue to assess the appropriate course of action while monitoring incoming data and its impact on the economic outlook.

<h2>Future interest rate hikes highly likely</h2>

Despite the decision to pause interest rate hikes, Fed officials have hinted that future increases may occur, depending on how close the economy gets to the 2 per cent inflation target. Higher interest rates result in increased borrowing costs, affecting mortgages, car payments, student loans, and other loans.

Watch:&nbsp;Is US economy really rich? Or is it a facade?

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Since March 2022, the Federal Reserve has raised interest rates 10 consecutive times, at a pace reminiscent of the 1980s. The increases have varied from 0.75 per cent during the summer and fall, when inflation was at its peak, to 0.25 per cent seen this spring. The current inflation rate stands at 5 per cent to 5.25 per cent, the highest since the 2008 financial crisis that preceded the 2008 global recession.

<h2>Fed continuously monitoring labour market</h2>

While the Federal Reserve has been using interest rates as a means to control inflation, it has also been closely monitoring the labour market for signs of economic cooling. In January, employers added 517,000 jobs, surpassing expectations and leading Fed officials to believe that interest rate increases could still occur without negatively impacting the job market.

<a href="https://www.wionews.com/business-economy/more-bad-news-for-the-us-economy-trade-deficit-widens-to-6-month-high-602028">Also read:&nbsp;More bad news for the US economy: Trade deficit widens to 6-month high</a>

Recent data from May indicates a robust job market, with the addition of 339,000 jobs. However, the unemployment rate has seen a slight increase from 3.4 per cent in April to 3.7 per cent in May.

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The US Federal Reserve paused its interest-rate hiking spree on Wednesday, avoiding what would have been an 11th consecutive increase. According to CNBC, the Fed was analysing the impact of the previous 10 increases on the economy, while leaving the rates unchanged at 5-5.

The US Federal Reserve paused its interest-rate hiking spree on Wednesday, avoiding what would have been an 11th consecutive increase. According to CNBC, the Fed was analysing the impact of the previous 10 increases on the economy, while leaving the rates unchanged at 5-5.25 per cent. It also added that further interest rate hikes were likely later this year, as the Fed struggles to achieve its inflation target of 2 per cent. “We have raised our policy interest rate by five percentage points, and we’ve continued to reduce our security holdings at a brisk pace. We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” Fed Chair Jerome Powell said at a press conference on Wednesday. Is inflation under control in US? The decision made by Federal Reserve's Federal Open Market Committee (FOMC) indicates a shift in its perspective on inflation. In June of last year, inflation reached a 40-year high of 9.1 per cent due to surging food and energy costs. However, inflation has since declined to 4 per cent in May, the lowest since April 2021. In a statement, the FOMC explained that maintaining the target range for interest rates during this meeting would allow the committee to evaluate additional information and its implications for monetary policy. The committee will continue to assess the appropriate course of action while monitoring incoming data and its impact on the economic outlook. Future interest rate hikes highly likely Despite the decision to pause interest rate hikes, Fed officials have hinted that future increases may occur, depending on how close the economy gets to the 2 per cent inflation target. Higher interest rates result in increased borrowing costs, affecting mortgages, car payments, student loans, and other loans. Watch: Is US economy really rich? Or is it a facade? × Since March 2022, the Federal Reserve has raised interest rates 10 consecutive times, at a pace reminiscent of the 1980s. The increases have varied from 0.75 per cent during the summer and fall, when inflation was at its peak, to 0.25 per cent seen this spring. The current inflation rate stands at 5 per cent to 5.25 per cent, the highest since the 2008 financial crisis that preceded the 2008 global recession. Fed continuously monitoring labour market While the Federal Reserve has been using interest rates as a means to control inflation, it has also been closely monitoring the labour market for signs of economic cooling. In January, employers added 517,000 jobs, surpassing expectations and leading Fed officials to believe that interest rate increases could still occur without negatively impacting the job market. Also read: More bad news for the US economy: Trade deficit widens to 6-month high Recent data from May indicates a robust job market, with the addition of 339,000 jobs. However, the unemployment rate has seen a slight increase from 3.4 per cent in April to 3.7 per cent in May. WATCH WION LIVE HERE ×

US Federal Reserve halts interest rate hike-spree after 10 increases in a row

Banking major Goldman Sachs has cut the GDP forecast for the US for 2023, anticipating an aggressive rate hike from the Federal Reserve. Reportedly, the GDP growth will see a decline of 0.

Banking major Goldman Sachs has cut the GDP forecast for the US for 2023, anticipating an aggressive rate hike from the Federal Reserve. Reportedly, the GDP growth will see a decline of 0.4 per cent to 1.1 per cent from the earlier projection of 1.5 per cent. Meanwhile, the projection for 2022 was left unchanged at zero per cent. Furthermore, the financial firm expects the US central bank, the Federal Reserve to hike policy rates by 75 basis points in its next meeting. “This higher rates path combined with recent tightening in financial conditions implies a somewhat worse outlook for growth and employment next year,” said the company. Read more: Goldman Sachs to start firing employees from next week amid economic slowdown “Our growth forecast is slightly below consensus and implies a below-potential growth trajectory that we believe is necessary to cool wage and price inflation.” it further added. The firm also believes that the unemployment rate will skyrocket to 4.1 per cent by the end of 2023, up 0.3 per cent from the previous forecast of 3.8 per cent. As reported extensively by WION, the US has already seen two consecutive quarters where the economy has contracted; meaning, an unofficial recession has already set in place. The worries were compounded earlier this week when the Consumer Price Index report was released. The inflation rate stood at a worse-than-expected mark of '8.3' per cent, leading industry experts to predict that the Fed may hike interest rates for a record fifth time this year, next week. Read more: Biden parties as stock market tumbles, inflation worsens and Fed indicates rate hike Moreover, as soon as the report came out, the US stock market tumbled to its two-month low. Reportedly, all three major US stock indices fell well below their numbers set in the month of June. The Dow dropped 139. 40 points to close at 30,822 while S&P 500 closed the week by siding 0.72 per cent. Lastly, Nasdaq Composite slide 0.9 per cent to finish the week at 11,448. Read more: As recession fears mount, Wall Street tumbles to a two-month low (With inputs from agencies) WATCH WION LIVE HERE:

Goldman Sachs slices US GDP forecast; predicts fed hike and rise in unemployment

Federal Reserve officials are coalescing around a plan to raise interest rates steadily starting in March and then move swiftly to shrink the central bank’s big bond holdings as policymakers look to cool the economy at a moment of rapid inflation.

Policymakers have spent the past week broadcasting that the interest rate increase they plan to make at their March meeting — one that investors already fully expect central bankers to make as they try to tame price increases — will be the first in a string of rate moves. Central bankers also appear to be converging on a plan to promptly start shrinking the Fed’s holdings of government-backed debt, which were vastly expanded during the pandemic downturn as the Fed snapped up bonds in a bid to keep markets functioning and cushion the economy.

The central bank bought $120 billion in Treasury and mortgage-backed securities for much of 2020 and 2021, but officials have been tapering those purchases and are on track to stop them entirely in March. By quickly pivoting to allow securities on its now nearly $9 trillion balance sheet to expire without reinvestment — reducing its holdings over time — the central bank would take away an important source of demand for government-backed debt and push rates on those securities higher. That would work together with a higher Fed policy interest rate to make many types of borrowing more expensive.

Higher borrowing costs should weigh on lending and spending, tempering demand and helping to slow price gains, which have been uncomfortably rapid. Fresh data out this week is expected to show further acceleration in the central bank’s preferred inflation gauge, which is already running at its fastest pace in 40 years.

Lael Brainard, a Fed governor who has been nominated by President Joe Biden to serve as vice chair, said last week that she believed a “series” of rate increases were warranted.

“I do anticipate that it will be appropriate, at our next meeting, which is in just a few weeks, to initiate a series of rate increases,” she said Friday at a forum held by the University of Chicago’s Booth School of Business in New York. Brainard said that the Fed would then turn to shrinking its balance sheet, a process that could be appropriate to start “in coming meetings.”

Michelle Bowman, another Fed governor, echoed that balance sheet reduction could start imminently, saying in a speech Monday that the Fed needs to begin to reduce the size of its bond holdings “in the coming months.”

The precise timing of balance sheet shrinking is a topic of debate. John Williams, president of the Federal Reserve Bank of New York, suggested Friday that the process could start “later this year,” which could suggest in coming months or slightly later. But officials have been uniformly clear that a pullback is coming — and likely more quickly than investors had expected until just recently.

Although Fed policymakers plan to shrink their holdings of Treasury bonds and mortgage-backed securities by allowing securities to expire without reinvesting them, rather than by actively selling the debt, the central bank’s latest meeting minutes suggested that officials could eventually move to outright sales of mortgage-tied securities. The minutes also suggested that officials thought “a significant reduction” in the size of the balance sheet would be warranted.

The central bank’s planned moves would be a rapid pace of change compared to the last time they increased interest rates, from 2015 to the end of 2018. Then, officials shrank the balance sheet only gradually and pushed up interest rates glacially, once per quarter at fastest.

Borrowing costs have already begun to rise as investors adjust to the Fed’s more rapid-fire plans. Markets expect six or seven quarter-point interest rate increases this year. The rate on a 30-year mortgage has climbed from about 2.9% last fall — when the Fed began its policy pivot — to 3.9% now.

The Fed’s policy changes “will bring inflation down over time, while sustaining a recovery that includes everyone,” Brainard said, adding that as the Fed signals that it will raise rates, “the market is clearly aligned with that.”

Yet with inflation rapid, wage growth strong and signs of taut labour market conditions plentiful, some Fed officials worry that the central bank needs to move even more quickly.

Bowman, for instance, said she was still open to a half-percentage point increase in March — something her colleague James Bullard, president of the Federal Reserve Bank of St. Louis, has also suggested.

“I will be watching the data closely to judge the appropriate size of an increase at the March meeting,” Bowman said.

But Bullard, who has repeatedly said he would prefer to see rates rise by a full percentage point of rate increases by July, has also noted that he would defer to the chair, Jerome Powell, on the size of the initial increase. And other members of the Fed’s policy-setting committee have suggested that they do not think starting with a half-point increase is necessary, suggesting that a smaller increase may be more likely.

“There’s really no kind of compelling argument that you have to be faster right in the beginning,” Williams, president of the powerful Federal Reserve Bank of New York, told reporters last week.

Federal Reserve officials are coalescing around a plan to raise interest rates steadily starting in March and then move swiftly to shrink the central bank’s big bond holdings as policymakers look to cool the economy at a moment of rapid inflation.

Federal Reserve officials are coalescing around a plan to raise interest rates steadily starting in March and then move swiftly to shrink the central bank’s big bond holdings as policymakers look to cool the economy at a moment of rapid inflation. Policymakers have spent the past week broadcasting that the interest rate increase they plan to make at their March meeting — one that investors already fully expect central bankers to make as they try to tame price increases — will be the first in a string of rate moves. Central bankers also appear to be converging on a plan to promptly start shrinking the Fed’s holdings of government-backed debt, which were vastly expanded during the pandemic downturn as the Fed snapped up bonds in a bid to keep markets functioning and cushion the economy. The central bank bought $120 billion in Treasury and mortgage-backed securities for much of 2020 and 2021, but officials have been tapering those purchases and are on track to stop them entirely in March. By quickly pivoting to allow securities on its now nearly $9 trillion balance sheet to expire without reinvestment — reducing its holdings over time — the central bank would take away an important source of demand for government-backed debt and push rates on those securities higher. That would work together with a higher Fed policy interest rate to make many types of borrowing more expensive. Higher borrowing costs should weigh on lending and spending, tempering demand and helping to slow price gains, which have been uncomfortably rapid. Fresh data out this week is expected to show further acceleration in the central bank’s preferred inflation gauge, which is already running at its fastest pace in 40 years. Lael Brainard, a Fed governor who has been nominated by President Joe Biden to serve as vice chair, said last week that she believed a “series” of rate increases were warranted. “I do anticipate that it will be appropriate, at our next meeting, which is in just a few weeks, to initiate a series of rate increases,” she said Friday at a forum held by the University of Chicago’s Booth School of Business in New York. Brainard said that the Fed would then turn to shrinking its balance sheet, a process that could be appropriate to start “in coming meetings.” Michelle Bowman, another Fed governor, echoed that balance sheet reduction could start imminently, saying in a speech Monday that the Fed needs to begin to reduce the size of its bond holdings “in the coming months.” The precise timing of balance sheet shrinking is a topic of debate. John Williams, president of the Federal Reserve Bank of New York, suggested Friday that the process could start “later this year,” which could suggest in coming months or slightly later. But officials have been uniformly clear that a pullback is coming — and likely more quickly than investors had expected until just recently. Although Fed policymakers plan to shrink their holdings of Treasury bonds and mortgage-backed securities by allowing securities to expire without reinvesting them, rather than by actively selling the debt, the central bank’s latest meeting minutes suggested that officials could eventually move to outright sales of mortgage-tied securities. The minutes also suggested that officials thought “a significant reduction” in the size of the balance sheet would be warranted. The central bank’s planned moves would be a rapid pace of change compared to the last time they increased interest rates, from 2015 to the end of 2018. Then, officials shrank the balance sheet only gradually and pushed up interest rates glacially, once per quarter at fastest. Borrowing costs have already begun to rise as investors adjust to the Fed’s more rapid-fire plans. Markets expect six or seven quarter-point interest rate increases this year. The rate on a 30-year mortgage has climbed from about 2.9% last fall — when the Fed began its policy pivot — to 3.9% now. The Fed’s policy changes “will bring inflation down over time, while sustaining a recovery that includes everyone,” Brainard said, adding that as the Fed signals that it will raise rates, “the market is clearly aligned with that.” Yet with inflation rapid, wage growth strong and signs of taut labour market conditions plentiful, some Fed officials worry that the central bank needs to move even more quickly. Bowman, for instance, said she was still open to a half-percentage point increase in March — something her colleague James Bullard, president of the Federal Reserve Bank of St. Louis, has also suggested. “I will be watching the data closely to judge the appropriate size of an increase at the March meeting,” Bowman said. But Bullard, who has repeatedly said he would prefer to see rates rise by a full percentage point of rate increases by July, has also noted that he would defer to the chair, Jerome Powell, on the size of the initial increase. And other members of the Fed’s policy-setting committee have suggested that they do not think starting with a half-point increase is necessary, suggesting that a smaller increase may be more likely. “There’s really no kind of compelling argument that you have to be faster right in the beginning,” Williams, president of the powerful Federal Reserve Bank of New York, told reporters last week.

US Fed officials firm up plans for a swift pullback of economic help

The US Federal Reserve held interest rates steady on Wednesday, while also downplaying recent weak economic growth, a signal it will remain on course for gradual rate hikes.

The wording of the Fed&#39;s policy statement strengthens the prospect of two more increases in the benchmarket lending rate this year, likely at the June and September meetings.

The Fed&#39;s policy-setting Federal Open Market Committee voted unanimously to keep the federal funds rate in a range of 0.75-1.0 percent, just as most analysts had expected.

The FOMC members discounted the tepid growth in the first quarter -- when GDP expanded by only 0.7 per cent, the slowest in three years -- as a one-time issue, while emphasizing the continued strong labour market and solid hiring.

&quot;The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace,&quot; the statement read.

The central bank raised rates in March and December, given steady job creation and some signs of mounting price pressures -- and amid the wave of optimism in the early days of President Donald Trump&#39;s term, with his promises of tax cuts and big infrastructure spending.&nbsp;

High bar for inaction 
 
Many economists also discounted the weak first quarter as an anomaly frequently seen in the first three months of the year, and continue to see the need for two more rate moves.&nbsp;

Fed-watchers applauded the nuance of the central bank&#39;s statement in signaling the continued move away from zero interest rates during the financial crisis, a shift known as policy &quot;normalization.&quot;

Barclays economists said although the Fed did not take action, &quot;it did something just as important: in the face of weak data, it signaled that it would maintain its normalization path this year.&quot;&nbsp;

At the same time, the Fed showed no uncertainty about the economy &quot;or hesitation over the path of policy,&quot; Barclays added.

&nbsp;Given that tone, &quot;we believe the bar for inaction in June is high. To derail June, the economy would need to provide proof of fundamental weakness to the FOMC,&quot; the economists said.

Mickey Levy of Berenberg Capital Markets noted that central bankers are not as reactive to every swing in data as they had been in the past two years.

The Fed &quot;appears to be firmly on a policy normalization track and is not reacting to every piece of high-frequency economic data,&quot; Levy said.&nbsp;

&quot;It would take a dramatic slowdown in the economy to derail the Fed&#39;s normalization plans.&quot;

&#39;Solid&#39; job gains 
 
Since the last meeting in March, &quot;The labor market has continued to strengthen even as growth in economic activity slowed,&quot; the FOMC statement said, with &quot;solid&quot; job gains and another decline in the unemployment rate, which now sits at 4.5 per cent.

And while household spending has risen only modestly, &quot;the fundamentals underpinning the continued growth of consumption remained solid.&quot;

Meanwhile, 12-month inflation has held close to the Fed&#39;s two percent target, even while some price measures declined in March.

The Fed&#39;s beige book survey of the economy prepared in advance of this week&#39;s meeting noted reports across the country of firms that had to provide bonuses, and increase wages and benefits, while still struggling to fill openings, even for low-skilled work.

Ian Shepherdson, chief economist of Pantheon Macroeconomics, said the rate hikes will be needed to head off inflation as the job market continues to tighten.&nbsp;

The FOMC members &quot;have not changed their view that the economy can take a &#39;gradual&#39; increase in rates, which will be needed to prevent an overshoot of the inflation target as the labor market tightens,&quot; Sherpherdson said. 
 
(AFP) 
 
&nbsp;

The Fed has kept federal funds rate in a range of 0.75-1.0%, just as most analysts had expected

The US Federal Reserve held interest rates steady on Wednesday, while also downplaying recent weak economic growth, a signal it will remain on course for gradual rate hikes. The wording of the Fed's policy statement strengthens the prospect of two more increases in the benchmarket lending rate this year, likely at the June and September meetings. The Fed's policy-setting Federal Open Market Committee voted unanimously to keep the federal funds rate in a range of 0.75-1.0 percent, just as most analysts had expected. The FOMC members discounted the tepid growth in the first quarter -- when GDP expanded by only 0.7 per cent, the slowest in three years -- as a one-time issue, while emphasizing the continued strong labour market and solid hiring. "The Committee views the slowing in growth during the first quarter as likely to be transitory and continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace," the statement read. The central bank raised rates in March and December, given steady job creation and some signs of mounting price pressures -- and amid the wave of optimism in the early days of President Donald Trump's term, with his promises of tax cuts and big infrastructure spending. High bar for inaction Many economists also discounted the weak first quarter as an anomaly frequently seen in the first three months of the year, and continue to see the need for two more rate moves. Fed-watchers applauded the nuance of the central bank's statement in signaling the continued move away from zero interest rates during the financial crisis, a shift known as policy "normalization." Barclays economists said although the Fed did not take action, "it did something just as important: in the face of weak data, it signaled that it would maintain its normalization path this year." At the same time, the Fed showed no uncertainty about the economy "or hesitation over the path of policy," Barclays added. Given that tone, "we believe the bar for inaction in June is high. To derail June, the economy would need to provide proof of fundamental weakness to the FOMC," the economists said. Mickey Levy of Berenberg Capital Markets noted that central bankers are not as reactive to every swing in data as they had been in the past two years. The Fed "appears to be firmly on a policy normalization track and is not reacting to every piece of high-frequency economic data," Levy said. "It would take a dramatic slowdown in the economy to derail the Fed's normalization plans." 'Solid' job gains Since the last meeting in March, "The labor market has continued to strengthen even as growth in economic activity slowed," the FOMC statement said, with "solid" job gains and another decline in the unemployment rate, which now sits at 4.5 per cent. And while household spending has risen only modestly, "the fundamentals underpinning the continued growth of consumption remained solid." Meanwhile, 12-month inflation has held close to the Fed's two percent target, even while some price measures declined in March. The Fed's beige book survey of the economy prepared in advance of this week's meeting noted reports across the country of firms that had to provide bonuses, and increase wages and benefits, while still struggling to fill openings, even for low-skilled work. Ian Shepherdson, chief economist of Pantheon Macroeconomics, said the rate hikes will be needed to head off inflation as the job market continues to tighten. The FOMC members "have not changed their view that the economy can take a 'gradual' increase in rates, which will be needed to prevent an overshoot of the inflation target as the labor market tightens," Sherpherdson said. (AFP)

US Federal Reserve keeps key lending rate unchanged

The US Federal Reserve raised interest rates by a quarter point on Wednesday and signalled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation.

The rate increase, regarded as a virtual certainty by financial markets in the wake of a string of generally strong economic reports, raised the target federal funds rate 25 basis points to between 0.50 per cent and 0.75 per cent.

&quot;In view of realized and expected labour market conditions and inflation, the committee decided to raise the target range,&quot; the central bank&#39;s policy-setting committee said in its unanimous statement after a two-day meeting.

&quot;Job gains have been solid in recent months and the unemployment rate has declined,&quot; the Fed said, noting that market-based measures of inflation compensation had moved up &quot;considerably.&quot;

More significant was a fresh batch of Fed policymaker forecasts that indicated the current once-a-year pace of rate increases will accelerate next year.

With President-elect Donald Trump planning a simultaneous round of tax cuts and increased spending on infrastructure, central bank policymakers shifted their outlook to one of slightly faster growth, lower unemployment and inflation just under the Fed&#39;s 2 per cent target.

The Fed&#39;s median outlook for rates rose to three quarter-point increases in 2017 from two as of September. That would be followed by another three increases in both 2018 and 2019 before the rate levels off at a long-run &quot;normal&quot; 3.0 per cent.

That normal level is slightly higher from three months ago, a sign that the Fed feels the economy is still gaining traction.

The Fed continued to describe that pace as &quot;gradual,&quot; keeping policy still slightly loose and supporting some further improvement in the job market. It sees unemployment falling to 4.5 per cent next year and remaining at that level, which is considered to be close to full employment.

Fed Chair Janet Yellen is scheduled to hold a press conference at 2:30 p.m. ET (1930 GMT) to elaborate on the decision.

Trump impact

US bond yields had already begun moving higher following the election and as expectations of the Fed rate increase solidified. By the start of this week, trading in fed funds futures assigned a greater than 95 per cent likelihood to a rate hike, according to data compiled by the CME Group.

All 120 economists in a recent Reuters poll had expected a rate hike on Wednesday.

In the weeks following Trump&#39;s November 8 victory, Fed policymakers have said his proposals could push the economy into a higher gear in the short run. Even though the details of the Republican businessman&#39;s plans remain uncertain, Wednesday&#39;s statement marked a rare case in the post-crisis era in which the Fed moved its interest rate outlook higher.

Risks to the outlook remain &quot;roughly balanced&quot; between factors that could slow or accelerate the economy beyond what the central bank anticipates, the Fed said, no change from the November assessment.

The rate increase was the first since last December and only the second since the 2007-2009 financial crisis, when the Fed cut rates to near zero and deployed other tools such as massive bond purchases to stabilise the economy.

(Reuters) 
&nbsp;

The rate increase from the previous range of 0.25 to 0.50% is the first hike since December 2015 and only the second in a decade

The US Federal Reserve raised interest rates by a quarter point on Wednesday and signalled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation. The rate increase, regarded as a virtual certainty by financial markets in the wake of a string of generally strong economic reports, raised the target federal funds rate 25 basis points to between 0.50 per cent and 0.75 per cent. "In view of realized and expected labour market conditions and inflation, the committee decided to raise the target range," the central bank's policy-setting committee said in its unanimous statement after a two-day meeting. "Job gains have been solid in recent months and the unemployment rate has declined," the Fed said, noting that market-based measures of inflation compensation had moved up "considerably." More significant was a fresh batch of Fed policymaker forecasts that indicated the current once-a-year pace of rate increases will accelerate next year. With President-elect Donald Trump planning a simultaneous round of tax cuts and increased spending on infrastructure, central bank policymakers shifted their outlook to one of slightly faster growth, lower unemployment and inflation just under the Fed's 2 per cent target. The Fed's median outlook for rates rose to three quarter-point increases in 2017 from two as of September. That would be followed by another three increases in both 2018 and 2019 before the rate levels off at a long-run "normal" 3.0 per cent. That normal level is slightly higher from three months ago, a sign that the Fed feels the economy is still gaining traction. The Fed continued to describe that pace as "gradual," keeping policy still slightly loose and supporting some further improvement in the job market. It sees unemployment falling to 4.5 per cent next year and remaining at that level, which is considered to be close to full employment. Fed Chair Janet Yellen is scheduled to hold a press conference at 2:30 p.m. ET (1930 GMT) to elaborate on the decision. Trump impact US bond yields had already begun moving higher following the election and as expectations of the Fed rate increase solidified. By the start of this week, trading in fed funds futures assigned a greater than 95 per cent likelihood to a rate hike, according to data compiled by the CME Group. All 120 economists in a recent Reuters poll had expected a rate hike on Wednesday. In the weeks following Trump's November 8 victory, Fed policymakers have said his proposals could push the economy into a higher gear in the short run. Even though the details of the Republican businessman's plans remain uncertain, Wednesday's statement marked a rare case in the post-crisis era in which the Fed moved its interest rate outlook higher. Risks to the outlook remain "roughly balanced" between factors that could slow or accelerate the economy beyond what the central bank anticipates, the Fed said, no change from the November assessment. The rate increase was the first since last December and only the second since the 2007-2009 financial crisis, when the Fed cut rates to near zero and deployed other tools such as massive bond purchases to stabilise the economy. (Reuters)

US Fed raises key interest rate by 0.25 points, signals more increases