Published: Wed, June 13, 2018
Economy | By

Fed raises interest rates as unemployment nears record lows

Fed raises interest rates as unemployment nears record lows

This hike, which was widely expected, is the Fed's second of 2018, and the central bank signaled it is likely to do two more increases by the end of this year. The federal funds target rate, which is now between 1.75 and 2 percent, is the highest it's been in almost a decade, indicating that the nation's central bank has confidence the economy will continue to expand.

Powell was speaking at a press conference after the Fed announced its decision to raise interest rates. That puts the Fed on track for four rate hikes total in 2018, something the Fed hasn't done since 2006. 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.

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.

Fed says further gradual rate increases will be consistent with sustained economic growth, strong labor market and inflation near 2 percent over medium term. For 2020, the Fed foresees a median rate of 3.4 percent. Investors had given just over a 91 percent chance of a rate rise on Wednesday, according to an analysis by CME Group. Not since 1969 has the jobless rate been lower.


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.

Powell faces a tricky balancing act as the Fed attempts to bring interest rates toward historical averages.

Trump's imposition of tariffs on steel and aluminum imports has enraged USA allies. While Japan's central bank isn't expected to make any major policy shifts, anticipation is rising that the ECB may outline as early as this week plans to begin paring its bond-buying stimulus program as a prelude to ending them altogether.

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