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Fed raises rates for 2nd time in 2017


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Fed raises rates for 2nd time in 2017

As expected, the U.S. Federal Reserve raised its benchmark interest rate 25 basis points to a target range of between 1% and 1.25%, according to a June 14 statement.

The central bank had forecast three hikes to its federal funds rate this year – the first took place at its March meeting.

The rate rise came despite two reports on June 14 indicating the economy was not growing as fast as expected. The consumer price index less food and energy dropped to 1.7% in May, while retail sales dropped 0.3%.

Ahead of today's Fed meeting, the dollar dropped to a new low for the year, while yields on the 10-year Treasury note likewise moved lower.

Since the start of the year, there have been a number of indicators that the economy is expanding at a slower rate than anticipated. Most important, inflation has not met the central bank's expectations April's core inflation rate came in at 1.9% year over year. At the same time, the yield spread between 10-year and 2-year Treasuries tightened to lows last seen in October a level that could indicate concerns about economic growth.

Job creation in May also did not meet expectations: there were 138,000 jobs created, as opposed to the 185,000 economists forecast. But a more benign explanation for the disappointing jobs number may be that employers have stopped looking. Job openings in April stood at a record high of 6.04 million, according to the Department of Labor.

Minneapolis Federal Reserve President Neel Kashkari dissented from the decision to raise rates.