Photo: Federal Reserves

JAKARTA (TheInsiderStories) – U.S’s Federal Reserves raising the interest rates by a quarter point to 1.5% for the third time this year and foresees three additional hikes in 2018, said the chairwoman on Dec. 13.

The Federal Open Market CommitteeIt (FOMC) also raised its U.S’s GDP estimate from 2.1 percent in September to 2.5 percent and forecast three rate hikes for 2018. Fed Chair Janet Yellen described continuing low inflation as a concern and a potential risk to policy. The Fed inflation target is 2 percent.

FOMC met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further.

The chairs also sees household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, both overall inflation and inflation for items other than food and energy have declined this year and are running below 2 percent.

Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding have affected economic activity, employment, and inflation in recent months but have not materially altered the outlook for the national economy.

Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12‑month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee’s 2 percent objective over the medium term.

Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Yesterday, Asian markets swung on in and out of positive territory as investors looked ahead of the Fed’s latest policy meeting. Wall Street stocks ended diverse on Tuesday (Wednesday morning GMT), with two major indexes Dow and S & P 500 update their closing record, when the U.S Fed started a two-day policy meeting.

The Dow Jones Industrial Average rose 118.77 points, or 0.49 percent, to close at 24504.80 points, and the S & P 500 added 4.14 points, or 0.15 per cent to close at 2664.11 points. Meanwhile, the Nasdaq Composite Index ended down 12.76 points, or 0.19 per cent to 6862.32 points.

However, Asian dealers were unable to take up the baton from New York and by the break Tokyo was down 0.3 per cent, Shanghai was marginally down and Singapore shed 0.3 per cent. Hong Kong added 0.3 per cent and Sydney was barely moved. Seoul added 0.4 per cent and Taipei put on 0.2 per cent.

Written by Linda Silaen, Email:


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