The United States Federal Reserve on Wednesday raised interest rates by 25 basis points, or 0.25%, to a range of 1.25% to 1.50%, Reuters reported. However, the bank retained its forecast for rates in 2018 and 2019 at three changes.
The Federal Reserve’s policy-setting committee cited “solid economic growth” and job gains as the reasons for raising the interest rates.
Federal Reserve policymakers predicted a jump in US economic activity in 2018 because of President Donald Trump’s new tax plan. The bank said that the US Gross Domestic Product growth rate is likely to be around 2.5% in 2018, up from the 2.1% it predicted in September. However, the growth rate would fall back to 2.1% in 2019, said the central bank.
“Changes in tax policy will likely provide some lift to economic activity in coming years,” Federal Reserve Chairperson Janet Yellen said. “At the moment, the US economy is performing well. The global economy is [also] doing well, we’re in a synchronised expansion.”
The central bank also said that the US unemployment rate would fall to 3.9% in 2018, and remain at that level in 2019. The present rate of unemployment is 4.1%.