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US Federal Reserve Likely to Hike Rates in New Chair’s First Session Wednesday

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WASHINGTON (Sputnik) - The Federal Reserve (Fed) is expected to continue the current pace of policy adjustments by raising rates by 0.25 percent after new chairman Jerome Powell’s first meeting on Wednesday, analysts told Sputnik.

The US Federal Reserve's Federal Open Market Committee (FOMC) plans to announce its decision on interest rates on Wednesday at 2:00 p.m. EST (6:00 p.m. GMT). The announcement will be followed by Powell’s first press conference as Federal Reserve chairman.

The Fed raised the benchmark federal funds interest rate three times in 2017 to its present 1.25-to 1.5-percent range.

"We expect the Fed to raise rates at the FOMC meeting by 25 bp [basis points]," Smith’s Research & Gradings senior economist Scott MacDonald told Sputnik on Tuesday.

MacDonald said his company projected a total of three small raises in US interest rates this year, not the four that have been widely predicted.

He also said US wage levels still lag despite unemployment being at only 4.1 percent.

"If there is greater traction on wages in the months ahead as well as greater pressure on housing then the interest rate dynamic could tilt to four rate hikes," he said.

A Federal Reserve police officer keeps watch while posted outside the Federal Reserve headquarters in Washington September 16, 2015 - Sputnik International
Federal Reserve Expected to Raise Rates Amid Loose Fiscal Policies
The anticipated rate increase was widely expected and it was also so small that it would have a negligible effect on US economic performance and on stock market levels, Brandeis University International Business Department Professor Alfonso Canella told Sputnik.

"The market is fully expecting a 25 bp increase in rates from the Fed, and it has already been ‘baked in’ the valuations," he said. "The impact on the domestic and global economies is negligible."

However, the Fed might still choose to follow up the rate increase with more rapid adjustments in the near future, Canella cautioned

"Some market participants suggest the US central banking authority could speed up its pace of policy normalization," he said.

The anticipated small interest rates rise would be the first major policy move that the Fed has undertaken since new Chair, Jerome Powell, succeeded Janet Yellin last month.

While Powell pledged to continue the course of gradual, data-driven rate hikes, some market participants are concerned the new Fed Chair might take a more hawkish stance on policy than currently projected.

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