Fed raises interest rates for third time in 2018, citing job growth

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The Fed lifted its short-term rate - a benchmark for many consumer and business loans - by a modest quarter-point to a range of 2 percent to 2.25 percent. The Fed funds futures market is now pricing in a 95.0% chance of a rate hike during today's FOMC meeting, meaning that investors should focus less on today's highly anticipated rate hike and focus more on Fed Powell's statement which will help the market determine whether we will have a fourth yearly rate hike in December and a rate hike next year as early as March. If the Fed finds that prospect likely, it might signal Wednesday that it expects to slow its rate increases next year.

In a statement after its latest policy meeting, the Fed dropped phrasing it had long used that characterized its policy as "accommodative" - that is, favoring low rates. "Unfortunately they just raised interest rates a little bit because we are doing so well".

Fed officials remained skeptical that Trump's tax cuts will result in a persistent boost to economic growth.

In a statement the central bank said: "In view of realized and expected labor market conditions and inflation, the Committee chose to raise the target range for the federal funds rate".

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"Basically, I'm a low-interest-rate person", Trump said.

According to the new estimates, economic growth will be 3.1 percent in 2018, an upward revision from the 2.8 percent projected in June.

The rate hike was the third this year and the seventh in the last eight quarters. "We can do other things with the money", he said. Any signal in that change, however, is unclear. That's up from a level of near-zero between the end of 2008 and late 2015.

"The removal of "accommodative" is not a dovish signal", said Carl Riccadonna, chief USA economist at Bloomberg Economics. "The rates projections show that the vast majority on the committee continue to believe that rates are below neutral".

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Diane Swonk, chief economist at Grant Thornton, told AFP policymakers face a tricky task in determining what the neutral rate is.

If the Fed acknowledges the points mentioned above in a dovish manner, then investors should be anxious about a possible continuation in the slowdown of the U.S economy and a possible adjustment in the Fed's interest rate plan.

Higher U.S. rates, though, may force more emerging markets to tighten monetary policy to defend their currencies at a time when investors are punishing those with fault lines such as large current-account deficits.

"Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low".

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