The Federal Reserve lifted short-term interest rates by a quarter-point and forecast that rates will rise higher than expected in the coming years as its new chairman Jay Powell responds to strengthening growth at home and abroad.
The US central bank raised the target range for the federal funds rate by a quarter point to 1.5-1.75 per cent as it predicted inflation would accelerate in the coming months. The Fed’s median forecast for interest rates at the end of 2018 was left unchanged, but its projections pointed to an extra increase in 2019 with more tightening to come in 2020.
“The economic outlook has strengthened in recent months,” the Fed said in a statement following its latest two-day meeting. “The Committee expects that, with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labour market conditions will remain strong.”