The US Federal Reserve yesterday increased its benchmark interest rate a by 25 basis point, however, lowering its projections for future hikes. In the statement released, Federal Reserve said, “In view of realized and expected labour market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 2-1/4 (2.25%) to 2?1/2 per cent (2.50%).”

The US Fed has hiked the interest rate fourth time this year and the ninth time since it began normalizing rates in December 2015. The US Fed stated that “The Committee judges that some further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity.”

The Federal Open Market Committee (FOMC) lowered its outlook for the long-run fund’s rate, to 2.8 per cent in the current month from 3 per cent in the September forecast. The 2019 estimate fell from 3.1 per cent to 2.9 per cent and both the 2020 and 2021 decline to 3.1 per cent from 3.4 per cent.

The markets responded poorly after the decision and drastically went during the news conference of Fed Chairman Jerome Powell’s. The Dow Jones Industrial Average finished down 352 points, a 733-point reversal from the highs of the day. The benchmark S&P 500 index also fell flat to a 15-month low.

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