Federal Reserve upbeat on US economy

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The US central bank said the US economic outlook had improved, as it kept interest rates unchanged in its first meeting since President Donald Trump took office.

The Federal Reserve ruled unanimously on Wednesday to keep its benchmark rate in a range of 0.5% to 0.75%.

The jobs market and economic activity have continued to strengthen, it said.

“Measures of consumer and business sentiment have improved of late,” the central bank also said in a statement.

The Fed had raised its benchmark interest rate by 0.25% in December, only the second increase in a decade.

President Trump has promised to boost growth through tax cuts, spending and deregulation, raising the prospect of higher inflation.

The Fed said inflation “will rise to 2% over the medium term”, but did not comment on the effect of potential economic policies from the Trump administration.

‘Two rate hikes’

Despite being upbeat, the central bank also signalled the Federal Open Markets Committee (FOMC), the body which sets rates, would still only make “gradual increases” in the key rate.

It did not give any update on when the body might next raise rates.

“This is only the first FOMC meeting of eight in 2017 so there are still plenty of opportunities for the Fed to raise interest rates throughout the year and it is likely that we will see a rate rise in March or June,” said Kully Samra, UK managing director of wealth management firm Charles Schwab.

“In our view, two rate hikes this year would be sufficient to stave off inflation concerns and would not negatively impact economic growth.”

US stock markets were little changed on the Fed’s announcement, as investors widely expected the central bank to leave rates untouched.

Article provided by BBC News

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