Federal Reserve Raises Interest Rates For First Time In 2018

Dated: 03/22/2018

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Federal Reserve raises interest rates for first time in 2018

Indicates two more rate hikes coming this year

As expected, the Federal Reserve announced Wednesday that it is increasing the federal funds rate for the first time in 2018.

Earlier this year, observers placed the likelihood of the Fed increasing rates by 25 basis points at the end of its March meeting at more than 75%.

And Wednesday, that’s just what the Fed did. Citing the strength of the economy, the Previously, the target range was 1.25% to 1.5%.

“Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate,” the Fed said in a statement.

“Job gains have been strong in recent months, and the unemployment rate has stayed low. Recent data suggest that growth rates of household spending and business fixed investment have moderated from their strong fourth-quarter readings,” the Fed continued.

In addition to expecting this rate increase, observers also predicted that the Fed will increase rates two more times this year.

It appears those predictions will likely prove true, as the Fed further indicated that it plans to raise rates twice more this year.

“The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the Fed noted. “However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

The members of the FOMC also increased their projection for GDP growth. At the last FOMC meeting in December, the FOMC members indicated that they expected to see GDP growth of 2.5% in 2018.

Now, the FOMC members report that they expect to see GDP growth of 2.7% this year. The FOMC members also increased the GDP growth projection for 2019 from 2.1% to 2.4%.

The March FOMC meeting was the first since Jerome Powell took over as Fed chair following Janet Yellen's resignation.


* Ben Lane, Senior Financial Reporter for HousingWire.

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