In a widely anticipated move, the Federal Reserve hiked up the nation’s interest rate by 0.25 percentage points on Wednesday.
The decision marks only the third time since the financial crisis that the Fed has implemented a rate increase.
The move to bump the key borrowing rate to a range of 0.75 – 1.0 percent comes at the conclusion of the Fed’s two-day monetary policy meeting.
Fed Chair Janet Yellen had pretty much confirmed the Fed’s intentions earlier this month, so there was muted reaction on Wall Street.
Traders used to quake in their boots at the mere thought of a rate hike, but they are still riding high on the “Trump rally” that has led stocks to record gains and emboldened companies who have put faith in President Donald Trump’s corporate tax reforms and promises of infrastructure spending. Stocks rallied slightly just after the announcement, and government bonds ticked upwards.
The Fed also indicated economic conditions warranted two further hikes this year, and three in 2018.
The issue of further increases is sure to be a continuing bone of contention between Trump and Yellen, who have been on a collision course for months as the president pushes for a stronger economy — and the Fed Chair continues to insist that we are already there. Inflation has almost hit the Fed’s target rate of 2 percent, and we’ve seen steady job gains for 77 months in a row — two key metrics that mitigate a rate hike in order to prevent an overheated economy and keep the dollar from getting so strong that it hurts exports.
During the presidential campaign, Trump accused Yellen of keeping interest rates artificially low for political reasons, and said he would seek to replace the Obama appointee before her term expires. However, Treasury Secretary Steven Mnuchin has said Yellen has performed well, telling CNBC in November that she has done a “good job” so far. Commerce Secretary Wilbur Ross also referred to her work as “reasonably good.”