Fed hikes rates, sees 3 more years of growth

Fed hikes rates, sees 3 more years of growth

France's CAC 40 added 0.2 percent, while Germany's DAX fell 0.3 percent.

The divergent afternoon moves in the stock and bond markets had nothing to do with the Fed statement or the chairman's comments, contends John Brady, managing director for global institutional sales at R.J.

Speaking of mortgages, because interest rates are on an upward trajectory, new mortgage debt will also most likely be getting more expensive.

The affordability index assumes a 20 percent down payment.

According to Goldman Sachs, low unemployment could fuel more aggressive rate increases next year.

Federal Reserve Chairman Jerome Powell says that the several rounds of tariffs launched by the Trump administration have yet to hurt the US economy's performance.

"Fed funds increases in September and December are as certain as can be", John Donaldson, director of fixed income at Haverford Trust, told CNBC. The Fed effectively placed its foot on the gas during the Great Recession, driving down rates to boost borrowing and pump more money into the economy.

The Fed chairman, Jerome Powell, gets that, saying at the post-meeting press conference that if widespread tariffs were in place for a long time "that's going to be bad for the United States economy".

"We don't consider political factors or things like that", Powell said.

The Fed dropped phrasing it had used for years that characterized its rate policy as "accommodative" by favoring low rates. Since then, policymakers have been tightening monetary policy by gradually raising short-term interest rates.

"The Fed seems to have grown more convinced of the need to keep raising rates beyond neutral levels". Britain's FTSE 100 was also up 0.1 percent.

According to Fed projections released after the meeting, the U.S. economy was expected grow by 3.1 per cent in 2018.

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Bond yields didn't move much following the announcement.

That tight policy stance is projected to stay level through 2021.

Although the Fed has been revising up its real GDP forecasts-to 2.8% from 2.1% for 2018, and 2.4% for 2019-it has maintained its subdued 1.8% median estimate of longer-run potential growth.

Their predictions for inflation remained unchanged at around 2%.

Still, some analysts hold to a more optimistic scenario: That momentum already built up from the government's economic stimulus will keep strengthening the job market and lowering unemployment, already near a 50-year low.

Powell and his colleagues are trying to engineer a soft landing for the U.S. economy, now enjoying its second-longest expansion on record, by raising rates just enough to prevent overheating, but not so much that they trigger a recession.

The target federal funds rate is now between 2 and 2.25 percent.

Fed officials indicated they expect to raise interest rates once more this year, and have penciled in three rate increases for 2019.

At 2%-2.25%, the new target range is barely above the Fed's favored inflation measure, the personal consumption deflator, which was up 1.98% in the 12 months through July, according to the most recent reading.

But the question on the minds of investors, borrowers and President Trump is how many more rate hikes are coming after this one.

The Federal Reserve has given the green light to raise rates again. The Fed would normally respond to weaker growth by cutting interest rates.

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