Powell was among the governors who voted for that approach, and the announcement Wednesday signaled that he will maintain it, particularly if economic growth continues to accelerate and unemployment remains at or below the 4.1 percent level it reached in February. The federal funds rate forms the basis of other interest rates, such as for credit cards and mortgages. The quarter-point increase was hardly a surprise. "In theory, a individual tax bill that lowers tax rates should encourage more labor force participation".
The Federal Reserve raised interest rates on Wednesday and suggested there will be at least two more rate hikes in 2018.
Economists are wondering whether faster economic growth might cause the Fed to pick up the pace of its rate hikes.
Central bankers did offer hints that they may raise rates a fourth time later this year as a result of faster global growth, stronger business investment and massive tax cuts. "In addition, the Fed's latest projection shows markedly higher expectations for economic growth and lower expectations for the unemployment rate in 2018 and 2019".
Fed officials also expected core inflation to rise to 2.1 percent next year, slightly above the Fed's target and up from an earlier projection of 2 percent.
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"If the economy evolves roughly as I suspect, I will likely support further increases over the course of the year", Mr. Bostic said in the text of a speech to be presented before an event in Knoxville, Tenn. The step, the central bank's premiere paramount resolution underneath new Chairman Jerome H. Powell was exceptionally awaited as the United States economy continues to toughen and the stock markets abide near record highs.
Yet, Powell told reporters that even with rising interest rates, the world's largest economy is "healthier than it has been since before the financial crisis".
The move put the federal funds rate at its highest level since 2008 and marked the central bank's first major decision under new Federal Reserve Chairman Jerome Powell.
Adam Cole, chief currencies strategist at RBC Capital Markets, said a "knee-jerk reaction" to the Fed flagging four hikes this year may see the dollar strengthen against the euro.
Wall Street had overwhelmingly expected the action, with the Fed more than two years into a course of slowly tightening monetary policy.
The midpoint of the Fed's target range will now reach 3.4 per cent by 2020, higher than the 3.1 per cent predicted previously and above the U.S. central bank's 2.9 per cent estimate of the neutral rate that neither restrains growth nor pushes it forward. The central bank predicted inflation as measured by its preferred PCE gauge would average 1.9% in 2018 and 2% in 2019.