The Federal Reserve on Wednesday raised the federal funds rate by 25 basis points to a range of 0.75% to 1%, its third rate hike since the end of 2015 and likely not the last in the near future.
Citing strong job growth, a stagnant unemployment rate, and inflation hovering slightly under the Fed’s desired target of 2%, the Federal Open Market Committee voted for the rate increase nearly unanimously; only Neel Kashkari, president of the Minneapolis Fed, voted to keep the rate at its previous range of 0.50% to 0.75%.
In a written statement issued Wednesday, the Fed implied that it wasn’t done increasing the federal funds rate.
“The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate,” the FMOC said, though it noted that “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”
The New York Times reported that Fed officials expect to raise rates twice more before the year is out, with a target goal of a 3.0% federal funds rate by the end of 2019.
The Fed only just upped the rate from a range of 0.25% to 0.50% in December, pointing to a similar slate of economic indicators such as inflation, housing spending, and the job market. Prior to that, the Fed made shockwaves in December 2015 when it raised rates by a quarter point from a range of 0 to 0.25%, its first increase in almost a decade.
The quickening pace of rate hikes marks a departure from recession-era monetary policy that resulted in cheap, easy credit for the better part of a decade, as the Fed attempted to help ease the United States out of the housing crisis. The rate range had remained at 0 to 0.25% since the end of December 2008, after a wild two years in which it had dropped all the way from 5.25% in 2006.
Written by Alex Spanko