Fed raises key interest rate and sees possible acceleration in hikes
Fed raises key interest rate and sees possible acceleration in hikes
Credit AP JACQUELYN MARTIN “The economy is doing very well. Most people who want to find jobs are finding them,” Fed chief Jerome Powell said Wednesday
13 June, 2018, 22:27
The Federal Reserve raised United States interest rates again on Wednesday, the seventh increase since 2015 when the central bank resumed raising rates after the last recession. Fed officials had been split about whether to raise rates three times this year or four.
The central bank raised the federal funds rate to a 1.75-2 percent target range, the second increase under Fed Chairman Jerome Powell.
The U.S. economy continues to strengthen, the Fed indicated, and it no longer needs the historically low interest rates that were put in place in the aftermath of the financial crisis to stimulate growth. The step was needed, the Fed said, to be sure rates stay within the intended boundaries.
The decision reflected an economy that's getting even stronger.
Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run. And since the Fed started its post-recession rate increases in late-2015, they've coincided with hikes so that the chair has an opportunity to explain the decision.
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Consumers can expect interest rates to rise for all types of debt. The unemployment rate is seen falling to 3.6 percent in 2018, compared to the 3.8 percent forecast in March.
The Fed aims to achieve its mandates of maximizing employment and stabilizing prices by lowering rates to spur growth during times of economic weakness and raising rates to slow growth if the economy threatens to overheat.
While many economists think the current expansion will exceed the 1990's streak, some worry about what might occur once the impact of the tax cuts begin to fade and the Fed's gradual rate hikes begin to curb growth.
Interest rates are going up again as the economy gets hotter.
In a technical move, the central bank also chose to set the interest rate it pays banks on excess reserves - its chief tool for moderating short-term interest rates - at just below the upper level of its target range.
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