The Fed raises key interest rate as expected at 1.00-1.25 per cent.

The u.s. central bank, the Federal Reserve raises its key interest rate, the target level for the overnight rate Fed funds, to a range between 1.00 and 1.25 per cent. The target was previously set between 0,75 and 1,00%.

According to Bloomberg News survey counted 95 out of 100 surveyed economists that the target range for Fed funds would be raised by 25 basis points, to 1.00-1.25 per cent. Five economists believed that the ränteintervallet would be left unchanged.

The Federal Reserve’s key interest rate was last modified on 16 march 2017, when it increased by 25 basis points to a range of 0.75-1.00 percent.

The rate decision was not unanimous, Neel Kashkari reserved (as he did against the interest rate increase in march). He wanted to leave the policy rate unchanged at this meeting.

The committee notes that the monetary policy stance is still accommodative and supports thus some further improvement in labour market conditions prevailing and a return to 2 percent inflation.

Regarding the timing and size of future interest rate adjustments the notes of the FOMC to monitor the different arbetsmarknadsmått as well as indicators of inflationary pressures and inflation expectations. You should also monitor the financial and international developments, and will closely monitor the actual and expected progress toward the symmetrical inflation target.

The Fed reiterates that it is assumed that the economic development will be done in a way that speaks of the ”gradual increases” in the Fed fundsräntan, and the level of interest rates is assumed to remain, for a time, below levels that are supposed to apply in the longer term.

”But the actual path for the Fed fundsräntan will depend on the economic outlook so they appear in the incoming data,” writes the FOMC.

The FOMC further reiterates that continuing the existing policy with the reinvestment of payments on bank holdings of securities. The committee expects, however, now that it will implement a program for the normalization of the balance sheet later in the year, provided the economy developed roughly as expected.

The program, which means that reinvesteringarna reduced gradually, are described in more detail in a separate appendix to the committee’s ”policynormaliseringsprinciper and plans”.

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