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FOMC hikes rates, anticipates another before end-of-year
The Federal Open Market Committee (FOMC), at the close of its two-day policy-setting meeting Wednesday, decided to raise the federal funds target rate by a quarter-point to a range of 2 to 2.25 percent. This is the third rate hike this year.
"The Fed’s decision was widely expected, and barring a major meltdown between now and December, another hike is nearly assured," said NAFCU Chief Economist and Vice President of Research Curt Long. "Despite a number of risks, the economy is on fairly solid footing, and inflation is ticking upward. As a result, NAFCU expects quarterly rate increases to continue at least through mid-2019." More of NAFCU's analysis on the Fed's actions can be read in the association's Macro Data Flash report, issued to members yesterday.
In its release, the committee said that the "labor market has continued to strengthen and that economic activity has been rising at a strong rate." In addition, it cited the low unemployment rate, and increased household spending and business fixed investments.
Regarding inflation, the FOMC said that on a "12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance."
The Fed will continue to reduce its securities holdings by decreasing its reinvestment of the principal payments from its holdings of Treasury securities and agency mortgage-backed securities.
The FOMC will meet again Nov. 7-8.