Fed Set to Become More Aggressive

Fed Set to Become More Aggressive

The Federal Reserve has a new chairman, Jerome Powell, and his first substantive remarks in his new role included announcing an interest rate hike.

The increase came as no surprise as job growth has exceeded expectations, wages are rising, and inflationary indicators show no signs of abating.

Powell seems to be picking up where former Chair Janet Yellen left off, and the interest rate increase was well-signaled. Like Yellen, Powell is restrained in discussing monetary policy. He noted the strong job market in his recent comments, as well as the continuing economic expansion and inflation that is moving toward the Fed’s 2% goal. He said, “Today’s decision to raise the federal funds rate is another step in the process of gradually scaling back monetary policy accommodation as the economic expansion continues.”

However, many analysts interpret Powell’s remarks as a signal of a shift toward more regular rate increases in the month ahead. With projections pointing to increasing economic growth this year and next, as well as continuing declines in unemployment, the Fed is expected to take a more aggressive stance.

Indeed, projects released by the new chairman prior to his news conference suggest revisions in the Fed’s outlook. The FOMC anticipates that U.S. GDP growth will reach 2.7% this year and 2.4% next year, up from figures released at the end of 2017.  Seven of 15 participants in the FOMC meeting projected that they would be able to raise rates at least four times before the end of 2018.

For more on the Fed and interest rates, please see:
Projections Point to ‘More Aggressive Fed’ Under Powell | US News

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