As widely predicted, the Federal Reserve announced today that it would raise interest rates by a quarter of a percent.
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1 to 1-1/4 percent,” the Federal Open Market Committee said in a statement. “The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.”
The hike marks only the fourth time in a decade the Fed has raised its benchmark interest rate. The last hike came in March, with the central bank holding rates steady at its May meeting.
Today’s hike was widely expected by analysts. However, questions remain about whether the Fed will continue its plan of further hikes this year.
“Fed officials predicted three increases at the beginning of the year, but inflation has weakened in recent months,” Binyamin Appelbaum wrote in an analysis for the New York Times. “Investors will be looking for signs that the Fed is no longer quite so confident that the economy is ready for higher rates.”
The FOMC said in its statement that it “expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate.” However, “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”