S&P expects four rate hikes from Fed this year

By Ovunc Kutlu

NEW YORK

Standard & Poor's (S&P) said Thursday that it expects the U.S. Federal Reserve to make a total of four rate hikes this year, instead of three.

"The outlook for the U.S. economy continues to strengthen, though growth rates for household and business spending have moderated somewhat from a very strong fourth quarter," the global rating agency said in a statement.

In addition, labor demand remains solid, and with tightening in market and increasing economic activity, inflation is picking up faster to reach the Fed's objective of two percent, it said.

"Despite the Fed's near-term outlook for only three rate increases, we believe the Fed will likely raise rates slightly faster, with four rate hikes in total this year," S&P said.

"This takes into account a stronger near-term economic outlook, helped by fiscal spending at a time when the U.S. output gap has closed," it had.

After the conclusion of its two-day March meeting, the Federal Open Market Committee (FOMC) voted unanimously on Wednesday to increase the Fed's benchmark interest rate by 25 basis points.

This marked the first rate hike by the central bank this year, and the sixth since December 2015.

The S&P noted that the FOMC statement released after the meeting had "an optimistic tone," which said the "economic outlook has strengthened in recent months."

This statement was "in line with FOMC participants' higher near-term GDP forecasts," the S&P and added that the Fed would pick up the pace to increase interest rates this year.