The Fed's interest rate committee, the US central bank, decided on Wednesday 13 June to raise the official interest rate in the United States (US) by 25 basis points to the range of 1,50% to 1,75%.
De sofa indicated that it wanted to increase that interest rate twice more during the rest of this year. There will then be three interest rate increases in 2. This is not surprising, because the bank was extremely optimistic about the prospects for the American economy. The Fed expects that economic growth in the US will increase slightly (until 2019).
The members also see a higher inflation, as well as even lower unemployment. This is already very low at 3,8%. There are currently 6,1 million unemployed people in the US, but 6,8 million open positions. This indicates that unemployment can indeed fall further. Such expectations include a more ambitious pace of monetary tightening.
The crucial question, however, is whether the Fed's rosy expectations, especially for 2019, will come true. This is important, because the intention to increase interest rates 2019 more times between now and the end of 5 is based on this.
How is the economy developing?
It remains to be seen, of course, how the economy will develop. In the meantime, it can be deduced from the documents of the Fed meeting (the press statement and the committee members' expectations about interest rates in 2019 and 2020) that the Fed means it when the bank says it will keep interest rates 2019 until Christmas 5. want to increase times.
The interest rate committee already has 5 members longer time say they want to raise interest rates faster. It is important that there are now 8 members who are strongly in favor of more interest rate increases. If there had still been 5, we would know exactly who they were and it would have been as expected. The fact that there are now 8 members who want to raise interest rates 2019 times (until the end of 5) indicates that the desire to tighten monetary policy more quickly is also spreading outside that group.
If the Fed indeed chooses to raise interest rates more often than previously expected, this will have all kinds of consequences for Europe, for example. However, also in emerging countries.