Fed interest rate: Federal Reserve hikes interest rate another quarter point today

Federal Reserve raises interest rates

Fed officials expect to raise interest rates at least once more in 2018 and had been split on a possible fourth hike in their last meeting. The median estimate implied three increases in 2019 to put the rate above the level where officials see policy neither stimulating nor restraining the economy.

The U.S. economy continues to strengthen, the Fed indicated, and it no longer needs the historically low interest rates that were put in place in the aftermath of the financial crisis to stimulate growth. The federal funds target rate, which is now between 1.75 and 2 percent, is the highest it's been in almost a decade, indicating that the nation's central bank has confidence the economy will continue to expand.

"Recent data suggest that growth of household spending has picked up, while business fixed investment has continued to grow strongly", the Fed wrote in its statement Wednesday announcing the interest rate hike. Other changes included referring to "further gradual increases" instead of "adjustments". Previously, the statement made separate references to survey-based and market-based measures of such expectations.

Estimates of longer-run interest rates were unchanged and seen reaching as high as 3.4 percent in 2020 before dropping to 2.9 percent in the longer run.

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The central bank also lifted its growth forecast to 2.8 percent this year, up a small amount from its projection of 2.7 annual growth in March. The step was needed, the Fed said, to be sure rates stay within the intended boundaries.

Fed says setting ioer rate 5 basis points below top of target range for funds rate aims to keep market rates well within range. Not since 1969 has the jobless rate been lower.

Fed vote in favor of policy was unanimous.

The Fed's pace of rate hikes for the rest of the year could end up reflecting a tug of war between a sturdy economy and the risks to growth, including from a potential trade war that could break out between the United States and such key trading partners as China, the European Union, Canada and Mexico.

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