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Fed, Citing Strong Economy, Raises Interest Rates

As expected, the U.S. Federal Reserve increased its benchmark lending rate by 0.25 of a point to a range of 2%-2.25%.
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As expected, the U.S. Federal Reserve increased its benchmark lending rate by 0.25 of a point to a range of 2%-2.25%.

The expected quarter-point increase was the central bank’s third this year. The Fed is likely to make another such adjustment in December. Three more increases in 2019 and one is 2020 also are expected.

“Our economy is strong,” declares new Fed Chair Jay Powell. He acknowledges that growth could be affected by the disruptions of U.S. trade tariffs, but he anticipates only a modest impact this year.

The Fed now expects the U.S. economy will expand by 3.1% in 2018, up from the 2.8% rate it predicted in March. But the bank also predicts the U.S. gross domestic product will expand by only 2.5% next year, largely because of trade pressures.

The Fed says Inflation is likely to be about 2% this year, with unemployment hovering around 4%. Powell expects the central bank probably will raise rates three times next year and once in 2020.

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