The Federal Reserve's dilemma is intensifying: When has the economy had too much of a good thing? The first non-economist to run the Fed in more than three decades stood at a podium rather than sitting at a desk like Yellen and her predecessor, Ben Bernanke, did. Interest rates on new fixed-rate mortgages could also climb.
The Fed now foresees four rate hikes this year, up from the three it had previously forecast.
That implies four total rate increases this year.
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"The economy is doing very well", Fed Chairman Jerome Powell said in a press conference after the rate-setting Federal Open Market Committee released its unanimous policy statement after the end of a two-day meeting.
Federal Reserve Chair Jerome "Jay" Powell said job gains are boosting income and confidence, while foreign expansion and tax cuts support additional growth.
The higher rates should be a boon for savers, while increasing borrowing costs for households and businesses throughout the economy.
The Fed anticipates that inflation will overshoot its 2% target this year; in March, officials saw that happening only in 2020. The unemployment rate is seen falling to 3.6 percent in 2018, compared to the 3.8 percent forecast in March.
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The Fed watches price measures closely to determine how fast to raise interest rates but has signaled that the two percent target is not a ceiling and that it would be comfortable with inflation rising slightly above that level for a time.
After nine years of steady if uneven recovery, the United States is now growing at a pace topping 4 percent, unemployment is as low as it has been this century, and inflation has safely edged up toward an official target.
The Fed aims to achieve its mandates of maximizing employment and stabilizing prices by lowering rates to spur growth during times of economic weakness and raising rates to slow growth if the economy threatens to overheat. Economists generally expect growth to remain above 3 percent through year end, while Fed policymakers raised their forecast a touch to 2.8 percent on Wednesday.
Consumers can expect interest rates to rise for all types of debt. Ahead of the announcement, markets were pricing in a almost 100% chance of a rate hike. The committee also cut their forecast for unemployment.
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There are rising concerns about trade more generally and the potential risks to the economic outlook. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 per cent. Indicators of longer-term inflation expectations are little changed, on balance. The stance of monetary policy remains accommodative, thereby supporting strong labour market conditions and a sustained return to 2 per cent inflation. More increases are expected this year but the Fed noted "readings on financial and global developments" would factor into its decisions on future increases.