The US Federal Reserve has raised the interest rates and has hinted at two more increases in 2018. This is the sixth time the interest rates have been revised upwards by the Fed ever since the Financial Crisis. Fed has stated that it will increase the hallmark interest rates between a range of 1.5 percent to 1.75 percent.
The Fed Chair Powell has expressed hope and positivity about the current state of the economy and said that Fed is playing the balancing act between too hurried and too slow revision of rates with an aim to bring back more standardised or normal interest rate levels. He signalled that the approach of former Chair Ms Yellen will be continued which was marked by gradual increases in rates and well-orchestrated selling of bond portfolios to boost the economy post-2008 downturn. Powell suggests if the economic growth remains steady and unemployment under check or capped below 4.1 percent level the status quo will continue.
The recent announcement has reiterated the Fed’s confidence in the economy and its inclination on the potential for inflation which had been brushed aside or not discussed while the expansion was going on. Experts have expressed optimism by raising the economic growth prediction to 2.7 percent and their estimate for growth to 2.4 percent. Estimates about unemployment are also positive as it is expected to fall to 3.8 percent in 2018.
The Fed has broadly indicated of a robust economic health which is continuously strengthening based on the moderately picking up of economic activity and sound job gains. At the same time, it suggested of a rise in inflation in coming months. However, the optimism has completely and seemingly ignored the looming uncertainties emanating from fat debt load and the recent air of protectionism. Powell stated that despite the tariffs there is no near-term threat to economic growth.