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Federal Reserve raises benchmark interest rate to 1.0 percent


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Federal Reserve raises benchmark interest rate to 1.0 percent

The cost of borrowing has been put up again in the United States.

The central bank, the Federal Reserve, raised interest rates for the second time in three months.

The benchmark rate was lifted from 0.75 percent to 1.0 percent.

Fed chair Janet Yellen and the other policymakers based that on the fact that the US is enjoying steady economic growth and strong job gains even though retail sales in February grew at a slower than expected pace.

They also expressed confidence that inflation is rising to the bank’s target of two percent.

The financial markets were expecting this rate hike and the Fed said further increases will be “gradual”. Two more are expected this year.

Share prices on Wall Street rose, but the dollar slipped in value against a basket of currencies as investors had hoped the central bank would be a little more aggressive in its timetable; however the policymakers did not flag up any plan to accelerate the pace of monetary tightening.

Great uncertainty over Trump policy changes

In a news conference after the rate hike decision was announced Yellen was asked if the Federal Reserve had considered the implications of President Donald Trump’s fiscal stimulus plan.

She replied that the policymakers had not discussed that, as there is “great uncertainty” over the character and size of potential policy changes.

She did reveal that she has been introduced to the president, that they had a very brief meeting and that she appreciated that opportunity. Yellen also said she had met Treasury Secretary Steven Mnuchin a couple of times and fully expects to have a strong relationship with him.