The Federal Reserve lifted short-term interest rates for a third time this year and signalled it will forge ahead with plans to gradually tighten policy even as central bankers face White House pressure to lower borrowing costs and concerns over the trade war with China.
The Federal Open Market Committee boosted the target range for its key rate by another quarter point to 2 to 2.25 per cent, in the eighth increase of the current cycle, while teeing up a further increase at its meeting in December.
The Fed dropped previous assurances that policy is “accommodative” as it removes the economic stimulus it put in place during the crisis. Median forecasts released by the Fed’s policymakers pointed to one more rate rise this year, followed by three increases in 2019 and another in 2020 — in line with previous expectations.
The US central bank is staying on course for tighter policy as unemployment heads toward multi-decade lows, wage growth accelerates to its quickest pace in nine years, and estimates point to annualised third-quarter growth exceeding 4 per cent. Donald Trump’s decision to impose tariffs on nearly $200bn of Chinese imports has dented confidence among some US businesses, but the Fed made no reference to trade worries in its post-meeting statement.
Instead, it gave a bullish update on the economy, which it expects to grow by more than 3 per cent this year, saying activity growth and job gains have been strong, as have spending and corporate investment. Risks to the outlook remain “roughly balanced,” it said.
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