Fed Raises Interest Rates; Considers Future Rate Increases

Federal Reserve (Fed) officials met earlier this week to decide whether they will need to raise interest rates more aggressively than previously contemplated in the coming years because of recent tax cuts and government-spending increases. Ultimately, the Fed boosted its key short-term rate by a modest quarter-point to a still-low range of 1.5 percent to 1.75 percent and will keep shrinking its bond portfolio. Both steps show confidence that the U.S. economy remains sturdy nearly nine years after the Great Recession ended, according to a Chicago Tribune article.

Last December, the Fed expected a gradual path of rate rises to allow the economy to keep expanding without overheating, according to a recent Wall Street Journal article. Initially, three rate hikes were penciled in for this year, along with two each in 2019 and 2020.

However, now more officials think they will need to raise interest rates at least four times this year if the economy performs in line with their expectations, another Wall Street Journal article reports. Some seven of 15 participants now expect at least four rate increases this year, an increase from four of 16 participants at the December meeting. Most Fed officials also expect the Fed would need to raise rates at least another three times next year.

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