Fed Raises Rates, Projects More Increases This Year

By: Mises Institute

Today Jerome Powell announced another .25% increase in the Federal funds rate, bringing it to a range between 1.75% and 2%. In a corresponding move, interest paid on excess reserves by on 20 basis points, rather than 25. This is a small but significant change to Fed policy, a reaction to the Federal funds rate moving steadily towards the Fed’s upper target range in recent months. 

The FOMC also increased its inflation outlook from last May’s meeting, now projecting 2.1% inflation in 2019 and 2020. Other measures of inflation are much higher still, with the consumer price index hitting a 6 year high at 2.8. 

In response to projected growth and inflation pressure, the FOMC also projected an additional interest rate hike in 2018. The underlying narrative of today’s announcement is the US economy is strong and good times are here. We will see if that bears out the rest of the year. 

The Wall Street Journal notes the changes in the Fed’s statement from its May release:

 

Powered by WPeMatico