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US Federal Reserve to raise rates with future rate outlook uncertain

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US Federal Reserve to raise rates with future rate outlook uncertain

Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington
Federal Reserve Chairman Jerome Powell speaks at a news conference following the Federal Open Market Committee meetings in Washington
Photo: Reuters/Aaron P. Bernstein

America’s central bank is expected to hike interest rates by 25 basis points to 2.25% today.

Analysts are agree that the environment—including a 49-year low 3.9% unemployment rate—is still conducive for another rate increase to keep a check on the buoyant 4.3% economic growth.

However, the Fed is likely to be concerned about the intensity of the US-China trade war, which saw tariffs on $260 billion worth of goods come into effect on Monday. While the inflationary impacts of such a move are minimal, rate hikes in the medium-term remain uncertain.

The latest round of tariffs have economists keeping vigil; some are fearing the first negative jobs figures will come in November, while others expect slower growth in 2019 due in part to the trade war with China. Given the White House’s threats of more retaliatory tariffs and Beijing’s threatening to increase red-tape for American businesses in China, there is no sign of an end to the dispute. Expect the Fed to increasingly frown upon the ongoing US-China trade war in medium-term forecasts.

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