The Federal Reserve raised a key interest rate for only the second time since 2008 Wednesday, and left its economic projections mostly unchanged despite granting the uncertainty of how Donald Trump’s economic policies could alter the economy and its future decision-making.
Chairwoman Janet Yellen announced that the federal funds rate, or the rate banks charge each other for short-term loans, would increase to a range between 0.5 and 0.75 percent, still substantially low by historical standards. She cited expectations that inflation would continue creeping toward a Fed target and the unemployment rate would remain steady below 5 percent.
“It is a vote of confidence in the economy,” said Yellen after a year-end meeting of Federal Reserve officials. She said they expect the need for only “gradual” rate hikes in the coming few years to achieve a neutral policy that keeps the economy on an even keel.
With President-elect Trump set to assume office in January, however, the Fed’s outlook could change. Trump favors both tax cuts and robust infrastructure investment—his agenda has touted low borrowing rates as a reason to do it now—which could accelerate future increases.
Yellen said Wednesday that no such stimulus was required, from an economic perspective. The Associated Press has more:
Yellen’s comments and more from the AP are available here and here.
