WASHINGTON // The US Federal Reserve raised interest rates by a quarter point on Wednesday and signalled a faster pace of increases in 2017 as the Trump administration takes over with promises to boost growth through tax cuts, spending and deregulation.
The rate increase, regarded as a virtual certainty by financial markets in the wake of a string of generally strong economic reports, raised the target federal funds rate 25 basis points to between 0.5 per cent and 0.75 per cent.
“In view of realised and expected labour market conditions and inflation, the committee decided to raise the target range,” the central bank’s policy-setting committee said in its unanimous statement after a two-day meeting.
“Job gains have been solid in recent months and the unemployment rate has declined,” the Fed said, noting that market-based measures of inflation compensation had moved up “considerably”.
More significant was a fresh batch of Fed policymaker forecasts that indicated the current once-a-year pace of rate increases will accelerate next year.
With president-elect Donald Trump planning a simultaneous round of tax cuts and increased spending on infrastructure, central bank policymakers shifted their outlook to one of slightly faster growth, lower unemployment and inflation just under the Fed’s 2 per cent target.
* Reuters