Fed raises interest rates and signals faster hikes on the way

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That puts the Fed on track for four rate hikes total in 2018, something the Fed hasn't done since 2006. While the national economy appears to be on solid ground for 2018, the Fed must now consider how growing global trade disputes could slow US growth.

Even so, raising rates too quickly could prevent vulnerable Americans and pockets of the country still struggling from reaping the benefits of a strong economy.

However quarterly economic forecasts show central bankers now expect the rate to end the year at 2.4%, rather than the 2.1% projected in March.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run.

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United States unemployment dropped to 3.8% in May, its lowest level since April 2000 and one of the lowest levels since the second world war.

Announcing the decision to increase its target for the fed-funds rate to a range of 1.75% to 2%, the Fed described the U.S. jobs market as "strong" and said economic activity had been rising at "a solid rate". Investors had given just over a 91 percent chance of a rate rise on Wednesday, according to an analysis by CME Group. Consumer and business spending is powering the economy, in part a result of the tax cut President Donald Trump pushed through Congress late a year ago. It then raised rates once in 2015, once in 2016, three times in 2017 and now twice this year. But if it miscalculates and overdoes the credit tightening, it can trigger a recession.

Fed says raises interest on excess reserves rate to 1.95 pct from 1.75 pct.

Rates for conventional mortgages are likely to see more gradual change.

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The Fed's meeting this week is to be followed by policy meetings of two other major central banks - the European Central Bank on Thursday and the Bank of Japan on Friday.

In a technical move, the central bank also made a decision to set the interest rate it pays banks on excess reserves - its chief tool for moderating short-term interest rates - at just below the upper level of its target range.

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