The Fed's measures of inflation were little changed, helping reassure investors that the USA central bank may not raise rates more than three times this year. Tax reform has passed and Congress is lifting government spending caps, boosting the near-term growth outlook. And Levy wonders, "will the stronger economic momentum generate overheating" and push inflation too high?
These charts lay out the conditions the central bank faces as it lays out its new road map and its policy outlook this year.
"Based on the data inside the summary of economic projections and the dot plot forecast, investors and firm mangers should anticipate a fourth rate hike added to the scoreboard at the June 2018 FOMC meeting", said RMS Chief Economist Joe Brusuelas.
A better-than-forecast acceleration in United Kingdom average weekly earnings encouraged the Pound to US Dollar (GBP/USD) exchange rate to extend its uptrend further. But with today's announcement, it looks like this may be changing.
Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. There's good reason to expect policymakers to step up their expectations to four 2018 Fed rate hikes by June - even if inflation remains tame.
In another change to the statement, the Fed said inflation on an annual basis is "expected to move up in coming months", after saying "move up this year" in the January statement.
The US Dollar may be biased to further gains should policy-makers at the US Federal Reserve today upgrade their economic projections. In December, officials said they expected unemployment to be 3.9 percent both this year and next. The US jobless rate held at 4.1 per cent in February, equal to its lowest since the tech boom, while payroll employment expanded by a robust 313,000.
But make no mistake, this is a big deal.
When mortgage payments go up and credit card interest rates spike, something else in the family budget has to give. Not to mention that 2 percent is supposed to be an average, not a ceiling - meaning that actual inflation should be above that level half the time, something that hasn't happened in six years.
Meanwhile, in data, USA total homes sales in February jumped to 5.54mln, up from 5.38mln, with economists having expected a reading of 5.4mln. That's been in train, so the Fed will have factored it in already.
The major USA index futures are pointing to a modestly lower opening on Wednesday following the upward move seen in the previous session.
The Fed announced it will raise the benchmark Fed funds rate to a range between 1.5% and 1.75%.
The yield on the benchmark 10-year Treasury note climbed to 2.901% compared to 2.881% on Tuesday. They predicted rates would rise three times next year and two times in 2020, a further indication of confidence in the economy.
Americans are taking on more debt, and they're soon going to be paying more for it.
"If the Fed is hiking alongside a rising longer-run rate estimate it suggests that they are not tightening policy all that much", Neil Dutta, head of US economics at Renaissance Macro Research, wrote in a pre-meeting analysis.
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