Fed signals 4 rate hikes this year, up from 3

Fed signals 4 rate hikes this year, up from 3

Since the crisis, the Fed has only raised interest rates at one of its quarterly meetings that were already scheduled to be accompanied by a press conference with the Fed Chair.

The economic expansion has survived for nine years and is now the second-longest in history.

The spike comes ahead of an expected Federal Reserve rate hike. Savers, though, may eventually receive slightly higher yields. But attention will be focused mainly on any hints that the Fed might accelerate its rate hikes in the coming months. They will also be assessing any observations from the Fed about the possible consequences of rising global trade tensions.

When the Fed last met in May, it left its short-term rate unchanged.

Job growth has consistently outperformed in recent years, driving unemployment down to 3.8 percent in May, the lowest reading since 2000. Consumer spending has rebounded from a winter lull.

That is a welcome step-up from the roughly 2-percent growth averaged throughout the recovery, which was plagued by a series of crises overseas and uncertainties at home, delaying the Fed's tightening plans.

Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington, U.S., March 21, 2018.

Fed officials and many economists worry that the low jobless rate could force employers to hike wages faster, as companies compete for workers.

Fed watchers will also want to see whether the central bank lowers its estimate of what's often called the "natural" unemployment rate.

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But for now, the Atlanta Fed estimates the USA economy is roaring at a 4.6 percent rate, a level it reached only twice since the recession. The Fed now pegs this rate at 4.5 percent. That could spark higher inflation.

"With inflation jumping to a six-year high in May and the USA economic outlook being encouraging, it will be interesting to see if there is an upgrade to the "dot-plot" forecasts", Lukman Otunuga of FXTM said.

The Fed has signaled that it would likely raise rates at least once more in 2018.

Besides updating its economic forecasts, the Fed will reveal the anonymous projections of its individual board members and its 12 regional bank presidents of the pace of future rate increases.

At the end of March, the average interest rate charge on cards, according to the Fed, was 15.32%, an 18-year high.

To be sure, the Fed is not inclined to hike rates any more than gradually after years of mostly over-optimistic predictions for inflation and economic growth, and disappointing wage gains of around 2.5 percent annually. Consumer and business spending is powering the economy, in part a result of the tax cut President Donald Trump pushed through Congress late past year.

Last month, the Fed reported that businesses around the country had expressed concern about growing uncertainty over global trade. All those countries have vowed to retaliate against any USA tariffs with their own penalties against US goods. In his news conference, Powell is sure to be asked about how the trade tensions could affect the USA economy and inflation.

While a few items remain on the US central bank's wish list, such as bigger gains in wages and productivity, the main goals of stable prices and full employment are effectively met.

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