US Federal Reserve rate hike expected to impact loans here

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Federal Reserve officials raised interest rates for the second time this year and upgraded their forecast to four total increases in 2018, as unemployment falls and inflation overshoots their target faster than previously projected.

Announcing the decision to increase its target for the fed-funds rate to a range of 1.75% to 2%, the Fed described the U.S. jobs market as "strong" and said economic activity had been rising at "a solid rate".

The dollar approached a three-week high against the yen and stood tall against the euro on Wednesday ahead of the Federal Reserve's policy meeting, which could give clues on how many more rate hikes might come out of the United States this year.

And so after what seemed like an arcane and abstract policy change from the Fed on Wednesday, this is the impact that may matter most to those who don't follow the news as closely as they follow their credit-card bill.

U.S. companies are hiring at a rapid pace and consumer and business spending remains healthy, the Fed noted, and core inflation is finally expected to hit the central bank's target of 2 per cent this year.

Economists had predicted the Fed would make this change to overcome the common view that the central bank will not change the benchmark interest rate at a meeting that does not include a press conference, which limits its options.

The Fed's policy statement said that the "labour market has continued to strengthen" and added that economic activity "has been rising at a solid rate". While awaiting for Fed Chair to deliver his prepared remarks and to field questions from the financial press a report that the Trump administration is finalizing a list of Chinese goods to be subject to additional tariffs hit the U.S. dollar like a ton of bricks.

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Last year's tax cuts are boosting economic growth, Powell said, but weak wage growth remains "a bit of a mystery".

The Fed was widely expected to raise interest rates Wednesday amid strong economic data.

The Fed now sees gross domestic product growing 2.8 percent this year, slightly higher than previously forecast, and dipping to 2.4 percent next year, unchanged from policymakers' March projections. Compared with the latest U3 unemployment rate of 3.8% in May, the Fed chairman and his colleagues assume the rate will drop to 3.6% this year. Finally, the median Fed funds rate for the end of 2020 was heldat 3.4%. It would also allow the Fed to be less choreographed and more spontaneous in cutting or raising rates as economic conditions warrant. Nor is there a rule that says rate hikes can't be announced between the official meetings of the Federal Open Market Committee, which concluded this month's session Wednesday.

The use of the terms "symmetric" and "medium term" is a clear indication the Fed is not in a hurry to get inflation to 2 per cent, and will be comfortable if prices rise above that level for a short time.

The 3-month SIBOR has hovered at 1.41 per cent since May. In the longer run, it maintained the forecast for 1.8% growth.

U.S. stocks are relatively expensive, but as long as corporate earnings are going up, they will have room to rise more. That's good news because it means the economy is largely moving on its own steam in the eyes of the Fed.

That is a welcome step-up from the roughly 2-percent growth averaged throughout the recovery, which was plagued by a series of crises overseas and uncertainties at home, delaying the Fed's tightening plans. "Auto loans growth spiked to 5-year highs with a rise of 7.8% YoY in April".