Fed Raises Rates

Federal Reserve officials followed through on an expected interest-rate increase today citing continued strengthening in the labour market and rising economic activity.

“Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, both overall inflation and inflation for items other than food and energy have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.”

In light of the information received since the Federal Open Market Committee met in November, the committee decided to raise the target range for the federal funds rate to 1.25% – 1.50%. According to the FOMC statement, “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2% inflation.”

Economic condition is expected to evolve according to the Federal Reserve,  in such a way to permit gradual increases in the federal funds rate. The path of the federal funds rate will depend on the economic outlook as informed by incoming data.


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