WASHINGTON, DC–To no one's surprise, the Federal Reserve has opted to increase interest rates for the third time this year, by a quarter-point to a target range of 2% to 2.25%.
The market might as well yawned. There was little change to Treasury yields, Heidi Learner, chief economist at Savills Studley, noted with the 2-year yields remaining around 2.83% and 10-year yields holding between 3.06% and 3.08%.
Fed Chair Jerome Powell put the increase in perspective during a press conference. “Our economy is strong,” he told reporters. “These rates remain low, and my colleagues and I believe that this gradual returning to normal is helping to sustain this strong economy.”
Better Growth Expectations
Indeed the Fed raised its expectation for economic growth to 3.1% from 2.8% for 2018. Next year Fed officials forecast growth will slow to 2.5%, an upward revision from the 2.4% that they had projected last quarter. Expectations for inflation were unchanged, with core PCE price index and PCE inflation projected to end 2018, 2019, 2020 and 2021 between 2% and 2.1%–exactly in line with the Fed's longer-run forecast for PCE, Learner said. Finally, the Fed also indicated, again, that more rate hikes were likely coming this year and next.
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