Fed raises interest rates as unemployment nears record lows

After Nine Years Of US Recovery, Fed Sheds Anxieties

The Federal Reserve hiked America's benchmark interest rate a quarter point on Wednesday to 1.75 to 2 percent, a move that will likely cause a slight increase in mortgage, credit card, auto and small business loan rates.

The widely-anticipated decision will lift the target for the central bank's benchmark rate to 1.75%-2%, the highest level since 2008. USA growth is also getting a boost from $1.5 trillion in tax cuts and a $300 billion increase in federal spending, with inflation at the central bank's 2 percent target for two months.

The Fed has raised rates seven times since late 2015 on the back of the economy's continuing expansion and solid job growth, rendering the language of its previous policy statements outdated. The unemployment rate in May was 3.8%, the lowest since 2000 and 1969, while inflation was just below the Fed's 2% target.

"The labor market has continued to strengthen. economic activity has been rising at a solid rate", the Fed's rate-setting committee said in unanimous statement after the end of a two-day meeting.

Powell faces a tricky balancing act as the Fed attempts to bring interest rates toward historical averages.

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They see another three rate increases next year, a pace unchanged from their previous forecast.

Stay tuned to FOX Business for coverage of Powell's remarks starting at 2:30 p.m. ET. The Federal Reserve releases minutes from the March meeting of its policymakers on Wednesday, April 11.

Fed policy makers now see USA unemployment at 3.6 percent in the fourth quarter, followed by 3.5 percent in 2019 and 2020, based on median projections. It would allow the Fed to be less choreographed and more flexible in cutting or raising rates as economic conditions warrant. Powell has repeatedly played down the dot plot as a guide to future interest rates, though investors continue to focus on it. Inflation for the next two years is expected to remain at 2.1%, unchanged from the previous forecast.

The median estimate for economic growth this year rose to 2.8 percent from 2.7 percent in March, with projections unchanged for 2.4 percent in 2019 and 2 percent in 2020.

Core inflation projections, which strip out volatile food and energy prices, is expected to tick slightly higher to 2.0% this year, up from March's projection of 1.9%.

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