Fed raises rates for second time in 2017

Fed raises rates for second time in 2017
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The Federal Reserve on Wednesday raised interest rates a quarter of a point to a range between 1 percent and 1.25 percent, citing the relatively steady growth of the economy and need to return to higher baselines.

The decision was expected after months of hinting. It is the second such hike by the central bank in 2017.


Fed officials said “realized and expected labor market conditions and inflation justified the hike, which was supported by all Federal Open Markets Committee (FOMC) members but Minneapolis Fed President Neel Kashkari."

FOMC also hinted toward future hikes this year, saying it “expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate.”

The Fed has started bringing interest rates slowly back toward historic averages after years of record lows, held steady so the economy could recover from the Great Recession. Fed officials warned that keeping rates too low, for too long, could limit the bank’s ability to respond to a financial crisis.

After rate hikes in December 2015 and December 2016, the Fed raised rates again in March, as unemployment and inflation hovered around the bank’s target ranges.

“The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” wrote Fed officials on Wednesday. “However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.” 

The Fed also detailed its plans to sell off trillions in securities purchased during the financial crisis to help stabilize the United States economy. The bank will sell $6 billion per month of Treasury bonds it holds, and $4 billion per month in agency debt and mortgage-backed securities.  

The Fed will increase those caps by $6 billion every three months, until the bank is selling off $30 billion in Treasury bonds and $20 billion in debt each month.

Updated at 2:18 p.m.