Federal Reserve pulls the plug – rates move higher


Jerome Powell holding press conference following FOMC meeting. Generated by IJG JPEG Library. Getty Images

After approximately two months since taking over the helm as the chairman of the Federal Reserve, Jerome Powell announced a rate increase.  The move was expected as while rates are cyclical they are based on a variety of economic factors.  Powell and the rest of the board agreed recent unemployment numbers, household confidence and the positive direction of the economy provided justification of moving the rates one-quarter of a percent or to the highest level of the year at 1.750%.

 

The formal announcement via a press conference followed the Federal Open Market Committee (FOMC) meeting held earlier today.  The vote was unanimous as all members of the FOMC voted to increase the rate.

 

“The Committee expects that economic conditions will evolve in a manner that will warrant further gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”  Federal Reserve.

 

The Federal Reserve is responsible for U. S. monetary policy and when there are positive economic signs, rate increases are a necessary buffer to control inflation or other negative impacts.  During the press conference, Powell mentioned at least two more rate increases are scheduled for 2018.

The fed rate is related to what banks are charged to obtain funds.  

Fed raises rate a quarter of a percent


[Washington, D.C.]  In its last meeting for 2017 the Federal Reserve’s Federal Open Market Committee (FOMC`) agreed to raise the discount rate from 1.250% to 1.500%.  The move was expected and based on the health of the economy and the unemployment rate falling, if not holding steady, the Fed’s felt the move will benefit the economy in the long run.  It was also mentioned the move is designed to thwart inflation and keep it no higher than two percent.

 

“The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.”  FOMC

 

Two dissenting votes

 

On the nine FOMC voting members, surprisingly there were two who voted against the increase due to concerns of maintaining the existing target.

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Voting for: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Patrick Harker; Robert S. Kaplan; Jerome H. Powell; and Randal K. Quarles.

Voting against the action were Charles L. Evans and Neel Kashkari.