U.S. FOMC hikes federal funds target rate range by 25 bps

The U.S. Federal Open Market Committee, today, hiked its federal funds target rate range by 25 basis points to 1-1/2 to 1-3/4 percent, as widely anticipated. The FOMC statement noted that “the economic outlook has strengthened in recent months”. This was also seen in upgrade projections for real GDP growth in the Survey of Economic Projections. The median projection for 2018 was raised to 2.7 percent and increased to 2.4 percent for 2019.

Along with more rapid economic growth, members downwardly revised their projection for the jobless rate and edged up their inflation expectations. The jobless rate is expected to trough at just 3.6 percent next year, as compared with the earlier 3.9 percent. The unemployment rate is expected to remain through 2020. The median expected rate over the longer-term dropped to 4.5 percent. The median estimate for core PCE inflation rose to 2.1 percent for 2019 and 2020.

The median expectation for the federal funds rate remained the same in at 2.1 percent for 2018 but rose for 2019 and 2020 to 2.9 percent and to 3.4 percent, respectively. The longer run projection rose to 2.9 percent from 2.8 percent.

Overall, the unchanged median projection for 2018 implies a slightly dovish lean, noted TD Economics in a research report. The U.S. Fed does not appear to be keep to get too far in front of the expected rise in economic growth but is happy to ensure its outlook is realized before draining the punchbowl, stated TD Economics.

At 19:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -149.64. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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