Federal Reserve raises interest rates

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

Interest rates are going up.

The Fed raised rates as expected on Wednesday in its first meeting under Chairman Jerome Powell. The central bank’s decision was a response to a sunnier economic outlook, very low unemployment and rising wages.

“The economic outlook has strengthened in recent months,” the Fed said in a statement following its two-day Federal Open Market Committee meeting. “Job gains have been strong in recent months, and the unemployment rate has stayed low.”

The Fed raised the federal funds rate, which helps determine rates for mortgages, credit cards and other borrowing, to a range of 1.5% to 1.75%. That was an increase of a quarter of a percentage point. Rates are still historically low.

The central bank stuck to its plans for three interest rate hikes this year. But it shifted its plans for next year, calling for three more rate hikes instead of two.

Stocks rallied after the announcement. The Dow was up about 200 points.

Fed officials were split on whether this week’s policy meeting was the appropriate time to signal a fourth rate hike in 2018.

Recent comments by top Fed officials about the country’s bright economic outlook had raised investor expectations that the Fed would accelerate rate increases to keep the economy from overheating.

Central bankers did offer hints that they may raise rates a fourth time later this year as a result of faster global growth, stronger business investment and massive tax cuts.

The Fed now expects economic growth to accelerate faster this year to 2.7%. At the December meeting, Fed officials estimated 2.5% economic growth this year ahead of the passage of Republican tax cuts and plans to increase government spending.

Earlier this month, Powell told lawmakers the economy was “strong” and tax cuts would add “meaningfully to growth.”

Policy makers also maintained their inflation outlook of 1.9%, slightly below the Fed’s target.

The unanimous decision on Wednesday’s rate hike signals to Wall Street that Powell, for the time being, will stick with his precedessor Janet Yellen’s plans for gradual rate increases.

The policy move leaves central bankers with room to assess whether they will need to raise rates faster to prevent the economy from overheating.

For years after the financial crisis, the Fed raised rates slowly to keep the economy humming. But a recent $1.5 trillion tax cut and $300 billion spending bill, along with an improved economic outlook, have more recently changed that calculus.

Wednesday’s rate hike is the sixth time the Fed has lifted interest rates since the economy collapsed in 2008.

Powell’s job is to keep the economy churning without starting a recession during his four-year term — a risk the Fed chair has said he does not see as imminent.

If the Fed raises rates too slowly, the economy could overheat. Tighten too quickly and inflation may not meet its target of 2% — the level the Fed sees as healthy for the economy.

The Fed’s preferred gauge of inflation stands at 1.5%. But central bankers expect it to “move up” this year, and data show it was already “a little bit higher” by the end of last year.

Donna Borak, CNN Money

Trademark and Copyright 2021 Cable News Network, Inc., a Time Warner Company. All rights reserved.

About FOX 2 News

FOX 2 and KPLR 11 in St. Louis cover the news in Missouri and Illinois. There are over 68 hours of live news and local programming on-air each week. Our website and live video streams operate 24/7. Download our apps for alerts and follow us on social media for updates in your feed.

President Harry Truman said: “It is amazing what you can accomplish if you do not care who gets the credit.” That spirit is alive and well at Fox 2. Our teamwork is on display each and every day.

Our news slogan is: “Coverage You Can Count On.” We quite frankly are too busy to worry about who gets the credit. Our main concern is serving the viewer.

We go where the stories take us. Whether it be Washington, D.C when a Belleville man opened fire during a congressional baseball game practice or to Puerto Rico where local Ameren crews restored power after more than 5 months in the dark.

Coverage You Can Count On means “Waking up your Day” with our top-rated morning show. From 4:00 am-10:00 am we are leading the way with breaking news. But our early morning crew also knows how to have some fun! Our strong commitment to the communities we serve is highlighted with our Friday neighborhood shows.

Our investigative unit consists of three reporters. Elliott Davis focuses on government waste, Chris Hayes is our investigative reporter, and Mike Colombo is our consumer reporter. They work in unison with the news department by sharing resources and ideas.

We continue to cover breaking news aggressively and relied on our seasoned journalists to make a difference with the stories we covered. The shooting of Arnold Police Officer Ryan O’Connor is just one example of that. Jasmine Huda was the only reporter who had exclusive access to the O’Connor family during his amazing rehabilitation in Colorado.

Last, but certainly not least, FOX 2 and KPLR 11 are committed to covering local politics. We host debates among candidates and have the most extensive presidential election coverage. Our commitment to politics isn’t just during an election year. We produce two political shows that air every weekend.


Latest News

More News