Magazine article American Banker

Fed Hikes Interest Rates for First Time in 2017

Magazine article American Banker

Fed Hikes Interest Rates for First Time in 2017

Article excerpt

Byline: John Heltman

WASHINGTON -- The Federal Reserve's Federal Open Market Committee raised the federal funds rate 0.25% on Wednesday, marking only the third rate hike since the financial crisis and a sign that the central bank sees the economy as finally heating up after a sluggish recovery

In a press statement, the committee said that gains in the job market and gradually increasing inflation has made the conditions right for a rate increase, but noted that the interest rate environment is still highly accommodative by historical standards.

"In view of realized and expected labor market conditions and inflation, the committee decided to raise the target range for the federal funds rate to .75-1%," the statement says. "The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2% inflation."

Minneapolis Fed President Neel Kashkari -- a noted critic of post-crisis reforms -- was the lone dissent on the committee, preferring instead to "maintain the existing target range," according to the committee statement.

The rate increase suggests that the Fed is hoping to quell some of the "animal spirits" that have been bubbling in the financial sector since the election of Donald Trump in November in anticipation of a more business-friendly tax and regulatory environment, as well as potential infrastructure stimulus and increased energy production. …

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