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FOMC raises the target for fed funds rate by 25bp to 2.25% - 2.5%

Following its 2-day meeting, the Federal Open Market Committee announced that it would hike the benchmark interest rate by 25 basis points to the target range of 2.25% - 2.5% in a widely expected decision. Jerome Powell, Chair of the Board of Governors of the Federal Reserve System, is scheduled to deliver his comments on the monetary policy in a press conference at 19:30 GMT. 

Key highlights from the official statement (via Reuters)

  • Fed raises target interest rate to 2.25-2.50 pct, reduces expected hikes for 2019 to two from three.
  • Fed says economy, labor market remain strong but expects growth to slow to 2.3 pct in 2019 vs 3.0 pct this year, inflation weaker at 1.9 pct.
  • Fed lowers estimate of long-run fed funds rate to 2.8 pct from 3.1 pct previously, with rates seen halting at 3.1 pct in 2020 vs 3.4 pct in previous projection.
  • Fed changes language slightly, now says expects 'some' further gradual increases in fed funds rate will be consistent with sustained economic expansion, strong jobs market and inflation objective.
  • Fed says inflation near target with expectations little changed.
  • Fed says risks to the economy appear "roughly balanced," adds it will continue to monitor global economic and financial conditions for their effect on economic outlook.
  • Fed sets interest rate on excess reserves at 2.40 percent, widening the spread to 10 basis points below top of fed funds target rate.
  • Fed vote in favor of policy was unanimous.

Fed press conference: Jerome Powell speech - Live Stream - Dec. 19.

About the FOMC statement. 

Following the Fed's rate decision, the FOMC releases its statement regarding monetary policy. The statement may influence the volatility of USD and determine a short-term positive or negative trend. A hawkish view is considered as positive, or bullish for the USD, whereas a dovish view is considered as negative, or bearish.

About the FOMC economic projections. 

This report, released by Federal Reserve, includes the FOMC's projection for inflation and economic growth over the next 2 years and, more importantly, a breakdown of individual FOMC member's interest rate forecasts.

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