Fed raises interest rates and signals faster hikes on the way

Cornelia Mascio
Giugno 13, 2018

The Federal Reserve raised interest rates on Wednesday, a move that was widely expected but still marked a milestone in the US central bank's shift from policies used to battle the 2007-2009 financial crisis and recession.

As expected, policymakers at the central bank hiked the benchmark federal funds rate by a quarter percentage point.

It's the second rate increase of this year and Fed officials anticipate one or two additional hikes before 2019.

The Fed move came after a two-day meeting where its members discussed the robust state of the U.S. economy and the potential impact of a trade war amid rising tension between the USA and its largest trading partners.

The Fed said its policy of further gradual rate increases will be "consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective". While the national economy appears to be on solid ground for 2018, the Fed must now consider how growing worldwide trade disputes could slow USA growth. After keeping interest rates low for years to boost growth, the central bank is now moving rates back to what economists say is a neutral position.

The unemployment rate is 3.8%, the lowest since 2000 and tied for the lowest reading since 1969.

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.

Interest rates are going up again as the economy gets hotter.

Rates for conventional mortgages are likely to see more gradual change. All those countries have vowed to retaliate against any US tariffs with their own penalties against USA goods. 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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