The Real Deal New York

Fed raises short-term interest rates; signals more hikes on horizon

The decision to raise rates came at Fed Chairman Jerome Powell's first policy meeting
March 21, 2018 06:00PM

Jerome Powell, Federal Reserve Chairman

The Federal Reserve voted to raise short-term interest rates by a quarter of a percent, citing a strong economy, and signaled more hikes were on the horizon this year.

The Fed’s decision to raise its benchmark rate to between 1.5 and 1.75 percent came Wednesday, during its first meeting led by new Federal Reserve Chairman Jerome Powell.

Officials planned three rate increases for 2018, but it seems increasingly likely there may be more increases this year and in 2019, according to the Wall Street Journal.

Seven of the 15 voting members expect four increases this year, up from four of 16 members who answered the same question in December, when Janet Yellen led the Fed.

The majority of officials expect three increases in 2019.

Higher rates tend to push up the costs of mortgages and push down property prices. Lower rates keep the cost of debt low, which the real estate industry has taken strong advantage of since the recession.

The Fed expects inflation to “move up in coming months,” and stabilize around its 2 percent objective in the middle of the year, which would fall in line with its January prediction. But inflation will likely exceed that target in 2019 and in 2020, officials said.

The most recent rate hike follows Yellen’s final decision as Fed chair to leave the interest rate at between 1.25 and 1.5 percent. That was done at the end of January, shortly before she left the position. Powell, a former member of the Fed’s Board of Governors and an Under Secretary for Domestic Finance at the Department of the Treasury, succeeded Yellen in early February. [WSJ] — Dennis Lynch