As of Tuesday morning, futures markets put the odds of a rate hike this month at 94.4 per cent, with a small but growing share of investors, or nearly six per cent, betting the Fed will even raise rates by 50 basis points.
The Federal Reserve signaled its confidence Wednesday in the USA economy by raising a key interest rate for a third time this year, forecasting another rate hike before year's end and predicting that it will continue to tighten credit into 2020 to help manage growth and inflation.
In a statement after its latest policy meeting, the Fed dropped phrasing it had long used that characterised its policy as "accommodative" - that is, favouring low rates. The central bank also stuck with a previous forecast for three more rate hikes in 2019. USA stocks initially extended gains but fell later in the trading session, with bank and financial stocks getting hit hard.
Markets initially interpreted that move as a sign the Fed may slow the pace of rate hikes in the period ahead as policy settings move to neutral, then restrictive, for economic growth.
Since the Fed's last meeting, job creation and GDP numbers have shown robust health, wages have risen and inflation has firmed, while measures of industrial activity and the housing market are among the few that have softened.
The Fed removed language in its statement announcing the rate hike that described its monetary policy as "accommodative", signaling that the economy is strong enough to grow without help from the central bank.More news: Twitter loses it after woman closes her own vehicle door
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"The higher pricing in the contracts was not large enough to alter traders' expectations for a Fed rate hike in December, which would bring it to a target range of 2.25 percent to 2.50 percent". Fed Governor Brainard also introduced the idea of short-term neutral and long-term neutral.
There were no dissents in the Fed's policy statement.
"We're doing great as a country".
Federal Reserve Chairman Jerome Powell and the Federal Reserve headquarters in Washington, D.C. With the economy strong and unemployment extremely low, it would have been more worrisome if the Fed had left rates where they were.
The jobless rate is now 3.9%. 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. In his news conference, Powell said some companies have told Fed officials that the tariffs have raised fears that supply chains will be disrupted and raw materials will cost more.
That tight policy stance is projected to stay level through 2021.