What the Federal Reserve rate hike means for USA households
- by Deborah Evans
- in Money
- — Mar 22, 2018
And the rate at which Americans are taking on more debt is rising across the board, according to a recent study from Chicago-based credit bureau TransUnion.
Voting for the FOMC monetary policy action were Jerome H. Powell, Chairman; William C. Dudley, Vice Chairman; Thomas I. Barkin; Raphael W. Bostic; Lael Brainard; Loretta J. Mester; Randal K. Quarles; and John C. Williams.
Some hints may come when Powell and members of the Federal Open Market Committee release their revised economic forecasts.
"The Fed concludes is two day meeting later on today, after which it is widely expected to raise interest rates by 25 basis points", said Craig Erlam, market analyst at Oanda.
The policy move leaves central bankers with room to assess whether they will need to raise rates faster to prevent the economy from overheating. But the Fed did step up its rate hike outlook for 2019 and 2020.
The average rate on a five-year Treasury-indexed adjustable-rate mortgage is now about 3.67 percent, according to Freddie Mac. And Fed members have at least one good reason to believe now is the right time: Unemployment is approaching a 50-year low, suggesting that one of our most precious resources might be getting dangerously scarce - namely, spare workers.
Rates are still historically low. Even after six rate increases over the past 27 months, the Fed's benchmark rate remains in a still-low range of 1.5 percent to 1.75 percent, up from a record low near zero as recently as December 2015. Policy makers continued to project a total of three increases this year.
"The economic outlook has strengthened in recent months", the USA central bank said in a statement which followed its two-day meeting.
Some analysts say a short-term economic stimulus from Congress - in the form of a $1.5 trillion tax cut and federal spending increases - could eventually push the Fed to add a fourth rate move. "Job gains have been strong in recent months, and the unemployment rate has stayed low".
Kremlin says no clear proof Russian Federation behind Skripal attack - RIA
Meanwhile, U.K. police have also opened a murder investigation in the death of another Russian exile living in Britain. The British Government took their silence as an admission of guilt, and expelled 23 Russians from the country.
Investors probably shouldn't be too reassured by a largely status-quo announcement on 2018 policy from the Fed.
While recent home sales and retail spending data have been on the weak side, the overall economic picture has brightened after growth accelerated to 2.3 percent previous year.
USA economic strength is evident with the unemployment rate at a 17-year low and companies receiving windfalls from President Donald Trump's tax cuts, which they may reinvest to create jobs and improve wages.
"The Fed is still expecting three rate hikes this year", said Lindsey Bell, investment strategist at CFRA Research.
By the end of 2019, the Fed expects its benchmark rate to hit 2.9% vs. a prior 2.7%.
A better-than-forecast acceleration in United Kingdom average weekly earnings encouraged the Pound to US Dollar (GBP/USD) exchange rate to extend its uptrend further.
The Dow Jones Industrial Average rose 190.7 points, or 0.77 percent, to 24,917.97, the S&P 500 gained 15.12 points, or 0.56 percent, to 2,732.06 and the Nasdaq Composite added 30.91 points, or 0.42 percent, to 7,395.21.
United States officials are tipped to confirm on Thursday additional investment restrictions on China to help close, what it says, is a $375bn trade deficit with the world's second largest economy.
