US Fed raises rates by 25 basis points, defying Donald Trump and a sagging stock market
- Raising rates to a range of 2.25 per cent to 2.5 per cent, the Fed nevertheless signalled fewer increases in 2019
- Fed Chairman Jerome Powell had faced intense pressure from US President Donald Trump not to raise rates
The US Federal Reserve raised borrowing costs for the fourth time this year, looking through a stock-market sell-off and defying pressure from US President Donald Trump, while dialling back projections for interest rates and economic growth in 2019.
By trimming the number of rate hikes they foresee in 2019 from three to two, policymakers signalled they may soon pause their monetary tightening campaign. Officials had a median projection of one move in 2020.
Following the decision, stocks erased gains and 10-year Treasury yields fell while the dollar bounced off its lows of the day. Investors may have been swayed by the Fed’s generally upbeat analysis and expectation of more rate increases than markets anticipate.
Chairman Jerome Powell and his colleagues said “economic activity has been rising at a strong rate” in a statement Wednesday following a two-day meeting in Washington. While officials said risks to their outlook “are roughly balanced”, they flagged threats from a softening world economy.
China’s growth outlook plays big part in direction of US rates
The Federal Open Market Committee “will continue to monitor global economic and financial developments and assess their implications for the economic outlook”, the statement said. The unanimous 10-0 decision lifted the federal funds rate target to a range of 2.25 per cent to 2.5 per cent.