US Fed raises rates, signals slower pace of hikes next year

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Washington, Dec 20 (IANS) The US Federal Reserve on Wednesday raised short-term interest rates by a quarter of a percentage point, but signalled a slower pace of rate hikes next year as the US economy is expected to cool down.

“In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2 percent,” the Fed said in a statement after concluding a two-day policy meeting, Xinhua news agency reported.

It marked the Fed’s fourth rate hike this year and the ninth such move since late 2015, as the central bank moves forward on the path of monetary policy normalisation.

The Fed said the US labour market has “continued to strengthen” and economic activity has been “rising at a strong rate” since the last policy meeting in November, while growth of business fixed investment has “moderated” from its rapid pace earlier in the year.

Fed officials expected the US economy to grow at 3 per cent this year, a little bit lower than 3.1 per cent estimated in September, according to the Fed’s latest economic projections released on Wednesday.

Fed officials also revised down their forecast for US economic growth in 2019 to 2.3 per cent from 2.5 per cent previously estimated.

With an expected slowdown in the US economy, Fed officials envisioned two rate hikes next year, down from three estimated in September, according to the median forecast for the federal funds rate.

–IANS

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