Economic Watch: Fed Hikes Interest Rates Again as Retail Sales, Inflation Ease a Bit
Despite retail sales falling by the biggest amount in 16 months and a dip in consumer prices, the Federal Reserve raised interest rates on Wednesday for the third consecutive quarter as the central bank signaled its confidence in the U.S. economy.
The Federal Open Market Committee pushed its benchmark interest rate higher to a range of 1% to 1.25%, meaning both consumers and trucking companies will face higher costs when it comes to borrowing money from banks.
This latest hike, coupled with earlier ones starting in 2015, has moved the federal funds rate higher by a full percentage point. Even with this latest increase the rate is still extremely low by historical standards ever since it was dropped to near zero by the end of 2008 due to the Great Recession.
The FOMC said it is leaving the door open to more interest rate hikes in the near term, most likely one more time this year and three times each in 2018 and 2019.
TD Economics noted the FOMC “was somewhat sanguine on the economy, indicating that activity has been ‘rising moderately’ while the labor market ‘continued to strengthen’ as job gains ‘moderated but have been solid’ and unemployment declined.”
“The statement highlighted consumer spending has accelerated recently, while business investment continued to expand. Inflation was viewed as having ‘declined recently’ while the core measure is running ‘somewhat below 2%,’ but expected to stabilize near the target over the medium-term,” said Michael Dolega, senior economist at TD Economics, part of TD Bank Group. “At the same time, inflation expectations were viewed as little- changed and still low.”
He said a Fed statement about this latest hike was largely as expected, with the Fed emphasizing the continued labor market improvement and accelerating economic growth as reasons to be optimistic for the economic and inflationary outlook. As such, …Read the rest of this story
