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Fed hikes rates for third time this year

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The US Federal Reserve has increased interest rates by a quarter of a percentage point – the third rate hike this year.

It comes as Fed chair Janet Yellen prepares to leave the role after Donald Trump decided to replace her.

The widely-expected hike sees the federal funds rate climb to a range of 1.25-1.5%, as the world’s biggest economy continues its return to normal following the financial crisis.
Central banks across the globe cut rates to near-zero during the crisis and in the UK and eurozone they remain stuck near that level while America has pulled away.
The Fed’s rate-setting committee said, as it announced the latest decision, that economic growth and job gains had been “solid”.
Officials acknowledged that the US economy had gained steam in 2017 by raising economic forecasts and lowering the expected unemployment rate for coming years.

Gross domestic product (GDP) is now expected to grow by 2.5% in 2018, up from the previously projected 2.1%, while the jobless rate is expected to fall to 3.9%, rather than 4.1% as previously pencilled in.
The Fed projected three more rate hikes in each of 2018 and 2019.
That was unchanged from latest forecasts – seen as slightly more “dovish” than expected as the recent uptick in the economy could have seen the central bank consider a quicker pace of tightening.

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The US dollar slipped back on the announcement while it cheered Wall Street, where the Dow Jones, S&P 500 and Nasdaq indices were all ahead.
Ms Yellen said at a press conference that she would work to provide a smooth transition when she is replaced by Jerome Powell, who was picked by Mr Trump to succeed her in February.

Source: SKY