Federal Reserve expected to boost key interest rate

Federal Reserve expected to boost key interest rate

The median estimate implied three increases in 2019 to put the rate above the level where officials see policy neither stimulating nor restraining the economy.

Information received since the Federal Open Market Committee met in May indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate.

Fed drops reference from previous statements that it expected rates to be below neutral rate for "some time".

The decision was driven by "indications that inflation is right around the corner", said Jason Reed, an economist and finance professor at the University of Notre Dame's business school. Previously, the statement made separate references to survey-based and market-based measures of such expectations. The step was needed, the Fed said, to be sure rates stay within the intended boundaries. And since the Fed started its post-recession rate increases in late-2015, they've coincided with hikes so that the chair has an opportunity to explain the decision.

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In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective.

The unemployment rate is 3.8%, the lowest since 2000 and tied for the lowest reading since 1969. It's the second rate hike under Powell, a Republican appointed to lead the Fed by President TrumpDonald John TrumpWhat you need to know about Tuesday's elections Danny Tarkanian wins Nevada GOP congressional primary Laxalt, Sisolak to face off in Nevada governor's race MORE. For 2020, the Fed foresees a median rate of 3.4 percent.

Fed says raises interest on excess reserves rate to 1.95 pct from 1.75 pct.

The Fed's meeting this week is to be followed by policy meetings of two other major central banks - the European Central Bank on Thursday and the Bank of Japan on Friday.

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