Fed votes to lift rates by quarter of a percentage point

Central bank indicated it will raise interest rates twice more in 2017

New York /
Mar.March 15, 2017 03:40 PM

In an unsurprising move, the Federal Reserve increased its benchmark interest rate to a range between 0.75 and 1 percent on Wednesday.

It’s the third time the Fed has raised interest rates since the 2009 financial crisis. Officials indicated they are expecting to raise rates at least twice more this year, the New York Times reported. Last year, the central bank flagged its plans to raise short-term interest rates more aggressively throughout 2017.

The raise followed a two-day meeting of its policy-making committee. In a statement, the Fed highlighted the recent increase in inflation, saying the domestic economy is expanding at a “moderate pace.” It continues to forecast an unemployment rate remaining at 4.5 percent and inflation at around 2 percent for the next two years.

Officials also said they expect interest rates will settle at an average 3 percent by the end of 2019, the Wall Street Journal reported, which is a little earlier than previously projected.

The president of Federal Reserve Bank of Minneapolis Neel Kashkari voted against the raise, but the Fed’s statement did not give a reason.

“The simple message is, the economy is doing well,” said Fed chair Janet Yellen at a press conference after the announcement, according to the Wall Street Journal.

Higher short-term interest rates generally spill over into higher long-term rates, which raises the cost of real estate financing and pushes cap rates up, generating downward pressure on real estate prices. [NYT] and [WSJ] Miriam Hall


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