The US Federal Reserve is widely expected to raise interest rates again at its regular meeting on Wednesday. In June, the last time the forecasts came out, a slim majority of the central bank's board wanted to do a December rate hike.
Applications for refinancing a home loan jumped three percent during the same week, but were only two-thirds of the volume one year ago, when interest rates were nearly a full percentage point lower.
The Fed's latest forecast predicts that the unemployment rate, now 3.9 per cent, will reach 3.7 per cent by the end of this year and then 3.5 per cent next year.
Short-term interest rates are most affected by Fed decisions. "Today the committee raised the target range for the federal funds rate by a quarter percentage point bringing it to two to two and a quarter percent".
The median forecast continues to expect the federal funds rate to end the year at 2.4 percent, implying one more rate hike this year, and rising to 3.1 percent in 2019, which indicates three more moves. There's ongoing debate about whether 3 percent (or another number) is the "neutral" or "normal" level of interest rates, meaning that's the rate that doesn't boost or curtail the economy.
But analysts say the central bank is tangling with a complex set of near-term economic questions, including a trade confrontation with China affecting hundreds of billions of dollars in goods that is likely to be inflationary; tax cuts and fiscal stimulus late in the economic recovery; and dizzyingly high asset prices alongside more or less stagnant wage growth.
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The UAE's banking regulator pushed the interest rate higher by 25 bps on its certificate of deposits, that are used as a monetary policy instrument through which changes in interest rates are transmitted to the financial institutions, the central bank said on Wednesday.
The rising cost of borrowing and tightening liquidity will make it more challenging for some countries, who don't have the fiscal buffers enjoyed by some of their regional peers, to bridge their budget gaps. In a highly unusual move for a president, Trump has publicly complained that the Fed's rate increases could blunt his efforts to boost growth through tax cuts and deregulation. It foresees the economy, as measured by the gross domestic product, growing 3.1 per cent this year before slowing to 2.5 per cent in 2019, 2 per cent in 2020 and 1.8 per cent in 2021. And growth is expected to decelerate to 2.5 percent next year.
Others worry that the escalating trade war with China will drag on America's expansion.
The Fed would normally respond to weaker growth by cutting interest rates. And U.S. consumers in general are relatively safe because their most risky asset, housing, was part of a bubble that popped more than a decade ago. And the Fed typically counters higher inflation by raising rates.
But so far, he said, the economic effects are not showing up in economic indicators. Household spending, as well as business investment, have grown strongly.
"We've been given a really important job to do on behalf of the American people", Powell said. But it has been gradually raising them over the past three years.