Fed Adjusts How It Raises Short-Term Rates to Keep Them Anchored

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Traders of USA short-term interest-rate futures increased bets the Federal Reserve will raise rates again this year and next after the central bank on Wednesday increased its benchmark lending rate and dropped its longstanding pledge to stimulate the economy "for some time".

Announcing the decision to increase its target for the fed-funds rate to a range of 1.75% to 2%, the Fed described the U.S. jobs market as "strong" and said economic activity had been rising at "a solid rate".

The "dot plot" chart which shows when rate-setters expect to tighten monetary policy shows two policymakers think the Fed has already hiked enough.

Fed officials also said they expect to raise rates twice more this year, faster than previously forecast.

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They see another three rate increases next year, a pace unchanged from their previous forecast.

Fed says economic activity rising at a solid rate, previously described growth as moderate.

Federal Reserve Chairman Jerome Powell announced Wednesday that as from January 2019, he will hold press conferences after every policy meeting.

Negative for gold though is that the central bank also forecasts tame inflation pressures throughout year. He'll likely address the decision to hike rates and the Fed's views on the overall economic outlook.

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So-called core inflation - which excludes volatile items like energy and housing - is now 2.2 percent, around the level the Fed is looking for. The average 30-year fixed mortgage rate recently hit a seven-year high, before retreating a bit to 4.54 percent. The central bank is aiming to keep record low unemployment and a glut of federal spending from pushing inflation beyond the Fed's 2 percent target.

The rate increase was in line with investors' expectations and showed policymakers' confidence in the economy's growth prospects, continued low unemployment and steady inflation.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run.

We are closing into the FOMC's June policy decision and as the clocks tick closer to the decision timing, following are the expectations as forecasted by the economists and researchers of 8 major banks along with some thoughts on the future course of Fed's action.

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