Fed raises rates for the fourth time this year, trims forecast for 2019 hikes

The Federal Reserve raised borrowing costs for the fourth time this year, ignoring a stock-market sell-off and defying pressure from US president Donald Trump, while dialling back projections for interest rates and economic growth in 2019.

By trimming the number of rate hikes they foresee in 2019, to two from three, policy makers signalled they may soon pause their monetary tightening campaign. Officials had a median projection of one move in 2020.

After the decision, stocks pared gains and 10-year Treasury yields fell while the dollar bounced off its lows of the day. Chairman Jerome Powell and his colleagues said "economic activity has been rising at a strong rate" in a statement Wednesday following a two-day meeting in Washington. While officials said risks to their outlook "are roughly balanced," they flagged threats from a softening world economy.

The Federal Open Market Committee "will continue to monitor global economic and financial developments and assess their implications for the economic outlook," the statement said.

Wednesday’s unanimous 10-0 decision lifted the federal funds rate target to a range of 2.25% to 2.5%.

The quarter-point hike came after Trump assailed the Fed on Twitter for two straight days, urging it to hold rates steady in the most public assault on its political independence in decades. Investors are also fretting over the economy, with the S&P 500 Index falling significantly in recent weeks.

Officials also altered key language in their statement, saying the FOMC "judges that some further gradual increases" in rates will likely be needed, a shift from previous language saying the FOMC "expects that further gradual increases" would be required.

In addition, the median estimate among policy makers for the so- called neutral rate in the long run fell to 2.75%, from 3% in the previous forecasts from September. The median projection is for the benchmark rate to end 2021 at 3.1%, down from a prior estimate of 3.4%.

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