US Federal Reserve raises key lending rate to 1.75-2%

The Federal Reserve officials expressed confidence that the United States economy was strong enough for borrowing costs to rise without choking off economic growth

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Washington: The US Federal Reserve raised the benchmark lending rate today, the second increase of the year, and signalled two more hikes are coming in 2018 and four in 2019, a possible sign of concern about accelerating inflation.

The Federal Reserve officials expressed confidence that the United States economy was strong enough for borrowing costs to rise without choking off economic growth.

The unanimous vote brings the federal funds rate to a range of 1.75-2.0% but the quarterly economic forecasts show central bankers now expect the rate to end the year at 2.4% rather than the 2.1% projected in March.

That implies four total rate increases this year. Wednesday’s rate increase was the second this year and the seventh since the end of the Great Recession and brings the Fed’s benchmark rate to a range of 1.75 to 2%. The last time the rate topped 2% was in late summer 2008 when the economy was contracting and the Fed was cutting rates toward zero, where they would remain for years after the financial crisis.

Jerome H. Powell, the Fed chairman, speaking in unusually blunt terms at a news conference on Wednesday, said the economy had strengthened significantly since the 2008 financial crisis and was approaching a “normal” level that could allow the Fed to soon step back and play less of a hands-on role in encouraging economic activity.

The Fed’s optimism about the state of the economy is likely to translate into higher borrowing costs for cars, home mortgages and credit cards over the next year as the central bank raises interest rates more quickly than was anticipated.