WASHINGTON (dpa-AFX) - As expected, the Federal Reserve on Wednesday announced its first interest rate increase of 2018 at the conclusion of its two-day policy meeting.
A strong labor market and strength in the broader economy compelled the Fed to raise its benchmark interest rate by a quarter of a percentage point, to a range of 1.5 percent to 1.75 percent.
Perhaps more importantly, the Fed reiterated its plan to raise interest rates gradually. The central bank continues to project three rate hikes in 2018.
However, the Fed now projects three rate hikes in 2019, up from the previous projection of two.
Instead of fearing stubbornly low inflation, 'officials are now looking to slightly overshoot their 2% inflation target in coming years,' the Wall Street Journal reports.
Annual inflation 'is expected to move up in coming months,' the Fed's accompanying statement says, a change from previous comments indicating that inflation would move up 'this year.
This was Jerome H. Powell's first policy meeting as Fed chairman. Powell, a former Fed governor, took over from Janet Yellen last month at the behest of President Donald Trump.
By the end of 2019, the Fed expects its benchmark rate to hit 2.9% vs. a prior 2.7%.
The bank left its PCE inflation forecasts unchanged at 1.9% in 2018 and 2% in 2019.
Copyright RTT News/dpa-AFX