US Fed raises rates on inflation and labour market data

US Fed raises rates on inflation and labour market data

The US Federal Reserve has raised interest rates by 25 basis points to 0.75-1 per cent.

In a statement following yesterday’s meeting of the Federal Open Market Committee (FOMC), the central bank noted inflation had increased in recent quarters moving closer to the FOMC’s target of 2 per cent. 

It added that since the last meeting in February, job gains remained solid and the unemployment rate was “little changed in recent months”, while household spending had continued to rise moderately. 

As a result the FOMC stated: “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 0.75 to 1 per cent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labour market conditions and a sustained return to 2 percent inflation.”

In spite of the rise, however, the FOMC continued to emphasise any further rate changes would be in the form of gradual increases and the “actual path of the federal funds rate will depend on the economic outlook as informed by incoming data”.