Wednesday, March 15, 2017

Fed Raises Rates

As expected the Federal Reserve raised rates today. You can read the press release(aka statement) here. On top of that the Fed gives us projections which include the famous blue dot plot.  For this year the Fed still sees 2 more .25% rate hikes. For 2018 the Federal Reserve actually expects 3 more hikes. So we can expect the Fed Funds rate to be in the range of 1.25%-1.50% this year,  and 2.0-2.25% in 2018.  Below is the dot plot and some excerpts from the statement. 

Nine of the 17 Fed officials who submitted projections indicated three rate increases would be appropriate in 2017, up from six in December. Only three officials saw the need for fewer than three moves this year versus six in December.

The latest projections are a sign that officials believe they are moving towards a faster pace of rate increases than in the past few years. The Fed began 2015 expecting to raise rates three times and 2016 expecting to raise them four times. But they ended up having to backtrack on those projections and made only one move in each of those years.

Fed Chairwoman Janet Yellen indicated in a March 3 speech that she expects a faster pace than in those earlier years


Information received since the Federal Open Market Committee met in February indicates that the labor market has continued to strengthen and that economic activity has continued to expand at a moderate pace. Job gains remained solid and the unemployment rate was little changed in recent months. Household spending has continued to rise moderately while business fixed investment appears to have firmed somewhat. Inflation has increased in recent quarters, moving close to the Committee's 2 percent longer-run objective; excluding energy and food prices, inflation was little changed and continued to run somewhat below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

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