WASHINGTON – The United States Federal Reserve raised on Wednesday its benchmark interest rate by a quarter point to a range of between 1.25 percent and 1.5 percent, while also offering a positive assessment of the American economy.
The US central bank made the widely expected move after its chief monetary policy-making body’s last two-day meeting of 2017 and final one with Janet Yellen as chair.
The Fed now has raised its benchmark federal-funds rate – which had been set at a historically low level in 2008, after the onset of the Great Recession – five times in the past two years and three times since the start of 2017.
“Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate,” the Federal Open Market Committee said in a statement.
The jobless rate stood at 4.1 percent in November, unchanged from the previous month and a level economists regard as near full employment.
The Fed said annual inflation would remain below 2 percent in the short term but stabilize around the central bank’s 2 percent target over the medium term.
The only surprise in Wednesday’s announcement was the news that the Fed presidents of Minneapolis, Neel Kashkari, and Chicago, Charles Evans, voted to maintain the existing federal-funds target range.
Yellen, who will step down in February, gave her final press conference as Fed chair on Wednesday afternoon.
She praised the man nominated to replace her – Jerome Powell, who still must be confirmed by the Senate – but expressed concern about the federal-debt implications of tax cuts that are expected to receive final congressional approval next week.
“It’s something I’ve been saying for a long time. I am personally concerned about the US debt situation. It’s not that the debt to GDP (gross domestic product) ratio ... at the moment is extraordinarily or worrisomely high. But it’s also not very low,” Yellen said.
The Fed also raised its growth forecasts for this year and next to 2.5 percent; in September, the Fed had projected the US economy would grow 2.4 percent in 2017 and 2.1 percent in 2018.
The central bank also offered more optimistic projections for unemployment, predicting a jobless rate of 4.1 percent at the close of 2017 and 3.9 percent for 2018.
In September, it had forecast an unemployment rate of 4.3 percent this year and 4.1 percent next year.