Fed hikes interest rates and predicts jobless rate to continue to fall

Jobs and unemployment tile
Jobs and unemployment tile

The Fed has lifted its benchmark interest rate by a quarter-point to a range of 1.5 percent to 1.75 percent. It is the sixth increase since December 2015, when it began raising rates from rock-bottom levels. The rate hike is the first under new Fed Chairman Jerome Powell, who replaced Janet Yellen last month.

The economy is growing moderately and "job gains have been strong in recent months," Fed policymakers say in a statement following the conclusion of its two-day meeting.

Fed policymakers said they expect to hike just three times this year, consistent with its last forecast in December. Some economists expected the Fed would signal a fourth hike this year.

Fed policymakers now expect the unemployment rate to drop to 3.6 percent by the end of next year, down from their previous estimate in December of 3.9 percent and far below the current rate of 4.1 percent. They project the rate will fall to 3.8 percent at the end of this year, down one-tenth of a point from its previous estimate.

The Fed now sees the economy growing more quickly, expanding 2.7 percent this year, up from a previous estimate of 2.5 percent. Growth will be 2.4 percent next year, the Fed expects, up from 2.1 percent. With growth picking up and unemployment low, policymakers expect core inflation -- which excludes the food and energy categories -- to rise 2.1 percent in 2019 and 2020. That's slightly above their 2 percent target.

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