U.S. Government Bonds Fall After Fed Raises Rates

Fed Rates Increased for Second Time This Year

Fed Rates Increased for Second Time This Year

According to CNBC, the Reserve released new data this week showing the GDP forecast rose to almost 3%, up from the previous predictions of 2.7%.

In their statement, Fed policymakers noted that the labor market "has continued to strengthen and that economic activity has been rising at a solid rate".

The Federal Reserve took note of a resilient US economy Wednesday by raising its benchmark interest rate for the second time this year and signaling that it may step up its pace of rate increases.

The strong economic data comes just hours after the US Treasury confirmed it had taken in a record-smashing tax haul in the first fiscal months of 2018; breaking previous highs by $50 billion in personal income tax.

The increase marks the highest level of interest rates in the United States since 2008. Finally, the median Fed funds rate for the end of 2020 was heldat 3.4%.

It's the second rate hike under Powell, a Republican appointed to lead the Fed by President TrumpDonald John TrumpWhat you need to know about Tuesday's elections Danny Tarkanian wins Nevada GOP congressional primary Laxalt, Sisolak to face off in Nevada governor's race MORE. The unemployment rate is seen falling to 3.6% in 2018, compared to the 3.8% forecast in March.

The Fed now envisions stronger growth this year - 2.8 percent, up from the 2.7 percent it predicted in March.

Fed officials and many economists worry that the low jobless rate could force employers to hike wages faster, as companies compete for workers.

This will raise borrowing costs for credit cards, auto financing, mortgages, and other loans, but help savers earn more interest on their deposits. The Fed expects inflation higher than 2% over the next two years, according to its latest projections. Risks to the economic outlook appear roughly balanced. The projections show inflation rising 2.1% for the next three years.

The bank's preferred indicator of inflation, consumer spending figures, showed annual inflation rose 2% in April or 1.8% if energy and food were excluded. The Fed previously nudged rates up in March. They signaled previously that they wouldn't overreact if inflation overshot the target, but they haven't said how much of an overshoot they will tolerate, or for how long.

Yields earlier swung between gains and losses as investors awaited guidance about whether policy makers see enough pressure on prices to increase their projected pace of interest rate increases, or whether concerns about the ability of the economy to sustain its growth in coming years might lead to a pullback in forecasts of rate increases in coming years, analysts said. It also forecast an even lower unemployment rate of 3.5% for 2019 and 2020.

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