Federal Reserve expects Trump tax reform to boost US spending

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Fed policymakers met in mid-December (Source: Getty)

Federal Reserve policymakers expect the Trump administration's tax reforms to boost spending by businesses and consumers, but doubt remains over the Fed's inflation target.

Minutes from the December meeting of the Federal Open Market Committee, released today, showed members raised their forecast for GDP growth from 2.1 per cent to 2.5 per cent for the year ahead.

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The committee also voted to increase rates from 1.25 per cent to 1.5 per cent, the fifth time the Fed has raised rates since the financial crisis.

"Most participants indicated that prospective changes in federal tax policy were a factor that led them to boost their projections of real GDP growth over the next couple of years," the minutes said.

However, policymakers were concerned that inflation may fail to reach the Fed's two per cent target, making further rate rises difficult.