The Federal Reserve raised interest rates by a quarter-point, its first rate hike this year, in a decision that was widely anticipated by markets. The FOMC increased the overnight funds rate to a range of 1.5% to 1.75% in its first meeting with newly-installed Chairman Jerome Powell at the helm.
The Fed projected three rate hikes this year at its December meeting, but investors took an upbeat assessment of the U.S. economy by Powell late last month as an indication that a fourth rate hike could be on the cards.
The following was excerpted from the Federal Reserve news release:
According to a Federal Reserve news release, information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low.
Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings. On a 12-month basis, both overall inflation and inflation for items other than food and energy have continued to run below 2%. Market-based measures of inflation compensation have increased in recent months but remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.
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 1-1/2 to 1-3/4 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2% inflation.