Moody’s Investors Service Inc. issued a report on Tuesday noting that the U.S. Federal Reserve Board is expected to raise interest rates by 25 basis points (bps) on Wednesday, raising the federal funds target rate to 0.75%-1.0%.
The credit-rating agency further predicted that U.S. policy makers would raise the interest rate two or three more times this year, to 1.5%-1.75%.
The report cited rising job numbers, firming energy prices and other factors that are beginning to push core inflation rates higher in advanced economies as key reasons for the move.
“If the economy begins to heat up, and wage pressures build up further, the Fed may choose to pursue a steeper rate-hike path to ensure that future inflationary pressures are contained,” says Madhavi Bokil, vice president and senior analyst with Moody’s, in the report.
Moody’s has raised its forecast for the U.S. economy based on several factors that depend on future actions by U.S. President Donald Trump’s administration, including cuts to income and corporate taxes and large increases in public infrastructure spending.
The credit-rating agency is now forecasting real gross domestic product growth of 2.4% in 2017 and 2.5% in 2018 for the U.S. Those are up from previous estimates of 2.2% and 2.1%, respectively.