The Federal Open Market Committee indicated that even though it's stepping up the pace of interest-rate hikes, economic growth should continue apace.
The central bank also signaled two more hikes are coming in 2018 and four in 2019, a possible sign of concern about accelerating inflation in the US.
"In view of realized and expected labor market conditions and inflation, the Committee made a decision to raise the target range for the federal funds rate to 1-3/4 to 2 percent", read a portion of a Federal Open Market Committee statement released Wednesday afternoon. Borrowers are likely to see higher bills next month on credit cards and mortgages, especially those with adjustable rates. The Fed's new forecast showed inflation inching up only slightly over the next 2 1/2 years. Total rate hikes projected for 2018 is up to four from three previously.
Along with rising interest rate expectations.
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However, higher rates would help savers earn more interest on their deposits.
While many economists think the current expansion will exceed the 1990's streak, some worry about what might occur once the impact of the tax cuts begin to fade and the Fed's gradual rate hikes begin to curb growth.
The Fed move came after a two-day meeting where its members discussed the robust state of the U.S. economy and the potential impact of a trade war amid rising tension between the USA and its largest trading partners. "This change is only about improving communications".
A gradual rise in inflation is coinciding with newfound economic strength.
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In its updated forecasts, the Fed envisions stronger growth this year, with the economy expanding 2.8 percent, up from the 2.7 percent it predicted in March. In the longer run, it maintained the forecast for 1.8% growth. The rate is estimated to fall 3.5% next year, through to 2020, down from the previous forecast of 3.6%.
Policy makers said in a one-page statement that the labor market "has continued to strengthen" and than economic activity "has been rising at a solid rate".
The committee sees further declines the unemployment. Risks to the economic outlook appear roughly balanced. The central bank is aiming to keep record low unemployment and a glut of federal spending from pushing inflation beyond the Fed's 2 percent target. That reflects the fact that the United States recovery after the crisis has been stronger, and inflation is getting closer to the Fed's target. This assessment will take into account a wide range of information, including measures of labour market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and worldwide developments.
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