Fed Raises Interest Rates, Predicts Two More in 2018, Sees Economy Growing Faster

US Federal Reserve raises key interest rate to 1.75-2%

U.S. Federal Reserve officials announced a modest interest rate hike on Wednesday, predicting two more this year as the American economy continues to grow.

The Fed raised its target range one-quarter of a percentage point, to 1.75 to 2 percent. This was the second hike this year, up from March’s increased range of 1.5 to 1.75 percent.

Two additional rate hikes are predicted this year, for a total of four. Earlier this year, the Fed’s projections saw just three rate hikes.

The Fed cited the strength of the economy in its statement announcing the rate hike.

“Job gains have been strong, on average, in recent months, and the unemployment rate has declined,” the Fed said. “Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly.”

The consumer price index was up 2.8 percent from a year ago as of May according to Bureau of Labor Statistics numbers released on Tuesday. Much of the increase is tied to fast-rising gasoline prices. The Associated Press reported that while there have been increases, commodities prices other than those for food and energy decreased by 0.3 percent in the past year.

“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-3/4 to 2 percent,” read a portion of a Federal Open Market Committee statement released Wednesday afternoon. “The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”

President Donald Trump has touted historic unemployment numbers this year with black unemployment hitting an all-time low in May and Hispanic unemployment seeing a similar low. The U.S. unemployment rate dipped below four percent as of April.

Follow Michelle Moons on Twitter @MichelleDiana 


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