‘We have seen the economy progress over the last several months in exactly the way we anticipated’. – Janet Yellen, Federal Reserve
As analysts expected, the US Federal Reserve raised interest rates at its March monetary policy meeting on Wednesday amid rising inflation, solid economic growth and the strong labour market. The Central bank lifted its overnight interest rate by 25 basis points to a range of 0.75% to 1.00%. This was the necessary step to get the Bank’s monetary policy back to a normal footing. The Fed Chair Janet Yellen said in a statement that the economy performed strong over the last couple of months, in line with policymakers’ forecasts. The Fed also confirmed its intention to raise rates at least two more times this year, if the economy remains on the track. Fed officials noted that inflation was close to the Bank’s target of 2% and corporate investment rebounded after a few months of weakness. Analysts suggest that interest rates are unlikely to return to a neutral level until the end of 2019. Moreover, some analysts see a faster pace of increases in 2017. Earlier on the day, the Bureau of Labour Statistics reported consumer prices rose 0.1% last month, following January’s gains of 0.6% and surpassing analysts’ expectations for a 0.0% reading. Meanwhile, core inflation advanced 0.2%, slightly down from a 0.3% climb seen in January but in line with forecasts. Other data released showed retail sales and core retail sales rose 0.1% and 0.2%, respectively.
