Fed raises key rate and foresees 2 more hikes this year
WASHINGTON (AP) — The Federal Reserve raised its key interest rate today in a vote of confidence in the U.S. economy's durability while signaling that it plans to continue a gradual approach to rate hikes for 2018 under its new chairman, Jerome Powell.
The Fed said it expects to raise rates twice more this year. And it increased its estimate for rate hikes in 2019 from two to three, reflecting more optimistic expectations for growth and low unemployment.
In a statement after its latest policy meeting, the Fed said it boosted its key short-term rate by a modest quarter-point to a still-low range of 1.5 percent to 1.75 percent. It also said it will keep shrinking its bond portfolio. The two moves mean many consumers and businesses will face higher loan rates over time.
Taken together, the Fed's actions and forecasts suggest a belief the economy remains sturdy nearly nine years after the Great Recession ended.
The Fed's latest rate hike marks its sixth since it began tightening credit in December 2015, after having kept its benchmark rate at a record low near zero for seven years to help nurture the economy's recovery from the recession. Today's action was approved 8-0, with the Fed avoiding any dissents at the first meeting Powell has presided over as chairman since succeeding Janet Yellen last month.
Bond yields rose and stocks held on to most of their gains after the Fed's announcement, which was widely expected. But by the time stock trading had ended, the Dow Jones industrial average was down modestly, and the yield on the 10-year Treasury note, a benchmark for mortgages and other loans, was up only slightly.
Economists said its decision to raise rates despite some recent sluggish data in areas like consumer spending showed that the Powell-led Fed has faith in the economy's resilience.