The Federal Reserve announced Wednesday it’s raising its benchmark federal funds rate in a series of gradual steps to align rates with where they have been historically.
The central bank will increase the rate by a quarter of a percentage point to between 1.75 percent and 2 percent. It is the second rate hike this year and the seventh since the recession ended in 2015; the target rate for federal funds also rose by a quarter of a percentage point in March, to between 1.5 percent and 1.75 percent.
The rate has not been above 2 percent since mid-2008, when the economy was contracting, according to The New York Times. At that time, the Fed began cutting rates toward zero in, where it continued for years after the crisis. (RELATED: How The Fed’s Rate Increase Will Impact Consumers)
“The economy is doing very well,” Jerome Powell, the Chairman of the Federal Reserve, said at a news conference following the announcement. “Most people who want to find jobs are finding them, and unemployment and inflation are low.”
Two more rounds of rate hikes are expected later in 2018, and most officials predict the Federal Reserve will again increase rates at least three more times in 2019, reports the Wall Street Journal. The hikes underscore confidence in the strength of the U.S. economy.
“Job gains have been strong, on average, in recent months, and the unemployment rate has declined. Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy have moved close to 2 percent,” the Federal Open Market Committee justified the hike in a press release.
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