The Federal Open Market Committee raised the target federal funds rate by 25 basis points to a range of 2.25 percent to 2.5 percent at its meeting in December. Although the move was consistent with the Fed’s messaging earlier in the year, some had expected current market uneasiness would influence the central bank and cause the Fed to hold off on the rate rise.
In a statement, the FOMC noted, “the labor market has continued to strengthen and that economic activity has been rising at a strong rate.”
In November, the Bureau of Labor Statistics reported the unemployment rate was 3.7 percent for the third consecutive month. And the U.S. economy grew at 3.5 percent in the third quarter, according to the second estimate from the Bureau of Economic Analysis released at the end of November.
“If you look at 2018, this is the best year since the financial crisis. … In that context, this move was appropriate,” explained chairman Jerome Powell in a press conference following the announcement.
The pace of interest rate increases may be decelerating. Current projections suggest there will be only two raises in 2019, down from earlier projections of three or four.
