lindsay dunsmuir and howard schneider
washington (reuters) – the federal reserve has raised interest rates on wednesday for the second time in three months, because of sustained economic growth and a strong labour market, and announced that it would begin to reduce its balance sheet this year.
the range of the rate (the federal funds rate was raised a quarter of a percentage point to 1% to 1.25% at the end of a two-day meeting of the monetary policy.
this is the fourth rate increase since the beginning of the cycle of normalization of monetary policy began in december 2015. the central bank is still a rate rise this year and confirmed that the purpose of the neutral rate over the long term is 3.0%.
the president janet yellen will give a press conference at 18:30 gmt).
the monetary policy committee (fomc) said in its statement that economy grows moderately, that the labour market continues to increase, and that the recent decline in inflation is likely to be only temporary.
the central bank also explains how it intends to initiate the reduction of the balance sheet, which has reached 4200 billion as a result of the repurchase of government loans and real estate loans (treasuries) shall be carried out for the main (mbs), just after the financial crisis of 2007-2009, and during the ensuing recession.
“in the opinion of the committee on the standardization of the launch of a programme to record this year as long as the economy is generally in line with expectations,” says the fed.
in addition, published with the release of monetary policy, the fed said that the process of reduction of the balance sheet is expected to increase by a gradual reduction of the reinvestment of maturing securities.
the central bank explained that the investment will be reduced initially to six billion dollars a month for the treasuries, increasing in increments of six billion every three months for 12 months, up to $30 billion a month.
for the other forms of public debt, and the mbs, the reduction will be $4 billion a month earlier, increasing levels of the four quarterly billion to $20 billion a month.
(wilfrid exbrayat for services in french, edited by marc angrand)
copyright & copy;, thomson reuters
Translated by forexguides.info Team