The Federal Reserve has hiked the short-term interest rate a quarter of a percentage point, to a range of 1.75% to 2%, and suggested that two more increases are likely to occur this year, for a total of four in 2018, reports CNBC. The rate is closely tied to adjustable-rate loans, such as home-equity lines of credit and credit cards. In a statement released at the end of a two-day meeting, the Fed suggested that the US economy is strong and not in need of a boost, according to the New York Times. Moreover, the bigger threat at this stage is inflation. The Fed anticipates that inflation will be 2.1% in 2019 and 2020, which is a little over its target rate of 2% through 2020, but is viewed as manageable.
This marks the seventh time the Fed has hiked rates since 2015, per Reuters, and is part of a slow process to return rates to normal levels. Ten years ago, the Fed cut interest rates to near zero in an effort to boost the economy and stem the deepening financial crisis and recession. Fed Chairman Jerome Powell said at a news conference that the US economy has strengthened considerably since the 2007-08 recession and is in “great shape.” The Fed expects unemployment to fall to 3.6% this year, and, said Powell, “Most people who want to find jobs are finding them.” US stocks dropped slightly on the news, notes MarketWatch, and bond yields nudged higher. (Read more interest rate stories.)