US Fed lifts interest rate, forecasts 3 hikes in 2018

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The US Federal Reserve has raised the benchmark interest rate by 0.25 percentage points, the third increase in 2017.

"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to raise the target range for the federal funds rate to 1.25 to 1.5 percent," the Fed said in a statement after concluding a two-day monetary policy meeting on Wednesday.

Central bank officials still envision three more rate hikes in 2018, unchanged from their forecast in September, according to the latest quarterly projections.

Fed officials continued to hold an upbeat assessment of the overall economy and job market and remained concerned over the soft inflation reading.

"Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate," said the statement.

According to officials' forecast, the US economy will grow 2.5 percent both in 2017 and 2018, higher than their forecasts in September which projected a 2.4 percent growth for 2017 and 2.1 percent increase for 2018.

In view of recent solid job growth, Fed officials expect the unemployment rate will stay at 4.1 percent by the end of 2017, lower than September's forecast of 4.3 percent.

The jobless rate is projected to further drop to 3.9 percent in 2018.

However, the Fed pinpointed declines of overall and core inflation indexes this year and reiterated that it is monitoring inflation developments closely.

Fed officials slightly revised up their forecast for inflation in 2017 to 1.7 percent from September's projection of 1.6 percent.

Due to the soft inflation reading, presidents of Chicago Fed and Minneapolis Fed voted against the decision, arguing that the central bank should keep interest rate unchanged at the meeting.

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Source(s): Xinhua News Agency