US Fed raises interest rates for second time this year

Washington, June 14
The US Federal Reserve has raised short-term interest rates by a quarter of a percentage point, its second rate hike this year and the seventh since late 2015.

"In view of realized and expected labor market conditions and inflation, the (Federal Open Market) Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 per cent," the central bank said in a statement on Wednesday after concluding a two-day meeting.

The Fed said the US labour market has "continued to strengthen" and economic activity has been "rising at a solid rate", with household spending picking up and business fixed investment growing strongly, Xinhua reported.

The Fed also said both overall inflation and so-called core inflation for items other than food and energy "have moved close to 2 per cent", suggesting that Fed officials are getting increasingly confident about inflation to reach its 2-per cent target.

The central bank expected the US economy to grow at 2.8 per cent this year, a little higher than 2.7 per cent estimated in March. The US unemployment rate is expected to drop to 3.6 per cent by the end of the year, lower than 3.8 per cent previously estimated.

Solid economic growth and tumbling unemployment are likely to keep the Fed on a steady path toward tightening monetary policy to prevent the U.S. economy from overheating, analysts said.