5 Insurers In Focus As Fed Hikes Rate, Raises Economic View

The rate hike announced in the recently concluded FOMC meeting comes as expected. With the latest raise of one-quarter percentage points at the last held FOMC meeting, the interest rate now stands at 2%. This decision was unanimously favored by all eight members of the regulatory body.

In fact, the odds for four hikes this year has increased. Media reports stated that odds for December hike followed by the one likely in September, increased to 58%, up from 50% according to traders. Federal funds rate is now projected at 2.4%, up from March projection of 2.1%.

For 2019, interest rate is estimated to be 3.1%, up from 2.9% projected at its May FOMC meeting while the same is expected to reach 3.4% at 2020 end.

Major indexes, namely S&P 500, Nasdaq and Dow Jones Industrial Average have lost in yesterday’s trading session.

Strengthening of the U.S. economy propelled the Federal Reserve’s rate raise from its near-zero level. The recent increase marks the seventh hike since the financial crisis.

The Fed also provided an optimistic unemployment outlook. Per Bureau of Labor Statistics, the unemployment rate in May was 3.8%, lowest in 18 years.  Fed officials continue to expect the employment rate at 3.6% for 2018, 3.5% for both 2019 and 2020, down from 3.9% for 2018 and 2019, 4% for 2020 and 4.6% over the longer-term, predicted in its March 2018 FOMC meeting. However, 4.5% unemployment rate over the long run still remains so. A spurt in employment shows an average of 0.2 million jobs growth over the last three months.

Encouraging economic data instills hopes. The Fed now estimates GDP to gain at 2.8% in 2018, up from the March forecast of 2.7%. Expectations thereafter remain in line with the March projections of 2.4% in 2019, 2% in 2020 and 1.8% over the long term.  

However, inflation might remain slightly above the targeted 2% through 2020, though the same will stay at 2% thereafter. Inflation is estimated at 2.1% till 2020.

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