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The Federal Reserve plans to raise interest rates even faster



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Interest rates are on the rise.

Driven by a strengthening economy and growing confidence that the Federal Reserve will reach its inflation target in the near future, central bank policymakers have suggested the way forward. Future interest rate hikes may be "steeper" in the next few years than previously thought according to the minutes of its March meeting on Wednesday.

"The members agreed that the strengthening of the economic outlook in recent months has increased the likelihood that a gradual upward trend in the federal funds rate would be appropriate," the minutes said.

In March, the Fed raised interest rates to between 1

.5% and 1.75%. That was an increase of one quarter of a percentage point. The Fed's target rate helps set interest rates on mortgages, credit cards and other loans.

Related: Fed raises interest rates on Powells debut

According to the protocol, there was a debate by policy makers about whether interest rates should be postponed to a later meeting to give investors a strong signal for monetary policy decisions would signal based on incoming economic data. But they were finally ready to move on.

It was the sixth increase since December 2015, when the Fed began tightening its monetary policy for the first time after the financial crisis. By historical standards, rates are still extremely low.

Fed officials were split over whether the political session last month was the right time to announce a fourth rate hike in 2018. The Fed has signaled that it will raise interest rates three times this year.

At the March meeting, the Fed hinted that it would prefer a more aggressive pace to keep the economy buzzing in the coming years. It has also postponed its plans to raise interest rates for next year, and is calling for three more interest rate hikes instead of two.

Almost half of FOMC members said at the time that they believed there was a need to raise interest rates more quickly if the economy developed as well as it expected.

An accelerated pace of interest rate hikes prompted some policymakers to propose the possibility to "sometime" revise the Federal Open Market Committee's statement in order to recognize a monetary shift from "accommodative" to "neutral or restrictive" protocol.

Related: Fed raises interest rates in Powell debut

Powell told reporters at its first press conference that economic forecasts may change, and the Fed could be "a bit less gradual or a bit more gradual" when it comes to the future interest rate decisions.

The minutes of the March meeting, chaired by Jerome Powell, also indicated that policymakers were uncertain about the impact of tax cuts and the possibility of a trade war for the future.

A "strong majority" of Fed officials fear that a trade war could harm the US economy, while most only mitigate the economic impact of steel and aluminum tariffs, the report says.

Fed officials discussed their decision to raise interest rates in March, when the government considered Trump charging tariffs on Chinese imports.

Most policymakers were also unsure how much – and when – the tax cuts would boost the economy. It is rare for legislators to boost the economy with tax cuts when the economy is already in full swing. An over-exertion of an already healthy economy could force the Fed to accelerate interest rate hikes.

During their meeting in March, the Fed raised its forecast for economic growth to 2.7% after 2.5% in December. That was before Republican tax cuts came into force and legislators reached an agreement on $ 300 billion in additional government spending.

CNNMoney (New York) First published on April 11, 2018: 2:52 pm ET


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