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FOMC raises rates as expected, two more hikes still seen
The US central bank tightened policy on Thursday, as expected, amid a modest upwards shift in policymakers' own expectations for the path of official interest rates in 2019 and 2020.
The Federal Open Market Committee raised the target range for the benchmark policy rate, the so-called Fed funds rate, by 25 basis points to between 1.5% and 1.75%.
Also as expected, US rate-setters' projections, which were published alongside the FOMC's policy statement, continued to project that two more hikes lay ahead in 2018.
In its statement, the FOMC, the central bank's main decision-making body, described job gains in recent months as "strong", with consumption and investment having moderated after "strong" fourth quarter readings.
On inflation, market-based measures of inflation compensation had risen but remained "low", whereas longer-term survey-based readings on inflation expectations were "little changed".
Going forward, "near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely," the FOMC said.
Economic growth over the medium-term was seen remaining "moderate", alongside a "strong" labour market, with inflation seen stabilising around the central bank's 2% target.
"The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run."
Wednesday's decision to raise the Fed funds rate was taken by a unanimous vote.
As the Fed chairman began reading a brief statement outlining the current macroeconomic backdrop, the yield on the benchmark 10-year US Treasury note was three basis points higher at 2.93% - its intra-day high.
Modest to moderate rise in projections for Fed funds rate in 2019 and 2020
When looking at the new median predictions from the Fed Board's members and regional Fed presidents, projections for the path of the Fed funds rate out to 2020 were revised only slightly higher, by two-tenths of a percentage point and three-tenths of a percentage points, to 2.9% at year-end 2019 and 3.4% at year-end 2020, respectively.
However, the central tendency of estimates, which eliminates the three lowest and highest projections, and the full range of projections was revised higher by more.
The top end of the range of estimates for 2020, in particular, shifted sharply higher, but only as the result of one outlier.
Indeed, the central tendency for estimates of where the Fed funds rate should be in the "longer run" was unchanged at between 2.8% and 3.0%.
-- More to follow --