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As expected US Fed hikes interest rates by 25 percentage points and sticks to earlier outlook

The central bank however did raise its estimate for GDP growth in 2018 to 2.5% from 2.1%, widely seen as due to the expected tax reform plan to be passed soon by legislators

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The central bank raised its benchmark federal-funds rate by a quarter percentage point to between 1.25% and 1.5%

The Federal Reserve on Wednesday, as widely expected by the market, raised a key US interest rate by a quarter percentage point, making it the last hike for the year.

The central bank disappointed the market with little or no indications of where they see inflation heading, choosing instead to stick to their earlier projections of three rate hikes in 2018.

Vote to hike rates was 7 to 2

The Federal Reserve is perceived to be taking a wait-and-see stance as it waits for Jerome Powell to take over from Janet Yellen, the current Fed chair in early February.

The Federal Reserve, in a statement released after the meeting on Thursday, did however raise its estimate for GDP growth in 2018 to 2.5% from 2.1%, widely seen as due to the expected tax reform plan to be passed soon by the legislators.

 

 

It also expects price pressures to stabilise around its 2% target over the next year or two.

The vote to raise the rates was 7 to 2.

Minneapolis Fed president Neel Kashkari and Chicago Fed president Charles Evans, preferred to leave rates unchanged, given the inflation readings.

The majority of officials however think inflation will move up next year as unemployment is very low. The central bank expects unemployment to fall below 4% in 2018.

 

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