Dollar remains weaker after Fed raises United States rates to 1.5%

Marco Green
December 15, 2017

Fed officials also hiked their projection for economic growth in 2017 to 2.5%, while growth in 2018 was expected to rise to 2.5%, a 0.4% increase from the Fed's September projection.

The US Federal Reserve has boosted interest rates from 1.25 percent to 1.5 percent in a policy meeting discussing the Fed's predictions and policies for the incoming year of 2018.

The Fed is predicting that interest rates will continue to tighten in 2018 with three (probably 0.25%) hikes likely across the year.

While the FOMC has been keen to note the robust nature of economic recovery in the USA, thanks to rising global demand, it had always been with underlying caution over the depressed rate of inflation.

Excluding the volatile food and energy components, consumer prices ticked up 0.1 percent in November, with the annual increase in the core CPI slowing to 1.7 percent in November from 1.8 percent in October.

Retail sales have been strong in recent months, despite the effects of summer hurricanes, and later this week November sales, which take in the post-Thanksgiving shopping spree, are expected to show further growth. The principal aim of the policy is to normalise interest rate policy following on from the years of ultra-low interest rates as a outcome of the Global Financial Crisis. The idea behind the move is to "re-arm" interest rate policy as a tool to deal with inflationary pressure (by raising interest rates) or recessionary pressure in the economy (by dropping interest rates). An unexpected cooling in a key measure of USA inflation means FedReserve policy makers may be hard-pressed to raise interest rates more aggressively in 2018. The pound rose 0.38% to $1.3369 and the euro climbed 0.34% to €1.1782.

"It's clear that the Fed thinks it can hike three more times next year".

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