As expected, the Federal Reserve has raised its benchmark interest rate for the second time in three months and forecast two additional hikes this year. The move reflects a consistently solid U.S. economy and will likely mean higher rates on some consumer and business loans.
The Fed hiked its Fed funds rate by 0.25 percent, to between 0.75 and 1 percent. The policy statement cited the strengthening labor market and improving economy as reasons for the hike, but it noted the pace of expansion is just “moderate.”
The Fed’s “dot plot” still indicates three rate hikes this year and next, but it inched up in 2019, when it projected the median Fed funds rate could be 3 percent, instead of its 2.9 percent forecast last December. The Fed still projects the long run “neutral” rate of Fed funds is 3 percent.
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