Fed Increases Interest Rates, Citing ‘Strong’ Economy

"Our economy is strong," Powell said. "Growth is running at a healthy clip, unemployment is low, the number of people working is steadily rising and wages are up." ( Farm Journal )

Following a two-day meeting, Jeremy Powell, chairman of the Federal Reserve’s Open Market Committee, announced the central bank is increasing interest rates for the third time this year. The Fed plans to increase them again in December, despite President Trump’s plea to slow down rate hikes.

This unanimous decision, which had been widely anticipated, increased rates by 25 basis points, to a range of 2% to 2.25%. It was the eighth time the committee has raised rates since late 2015 and was the first time they have ever raised rates in September.

Analysts agree the most interesting outcome of the meeting was the removal of the word “accommodative” from its statement. Experts say the unexpected removal of the language could give the committee additional flexibility in how often it raises rates next year.

“This rate hike is no surprise, but the removal of the signal that policy is still accommodative will raise a few eyebrows,” James McCann, senior global economist at Aberdeen Standard Investments, told MarketWatch.com.

During his comments, Powell was quick to point out the Fed plans to continue with their current strategy.

“This change does not signal any change in the likely path of policy,” Powell said. “Policy is still accommodative.”

According to MarketWatch.com, the Fed’s overarching goal is to nudge up short-term interest rates to what it considers a “neutral” level that neither supports nor restricts economic growth.

Short-term interest rates tend to see the impact of an interest rate increase first, although savings accounts should see increases too.

Similar to the last Fed meeting, Powell is bullish on the economy.

"Our economy is strong," Powell said. "Growth is running at a healthy clip, unemployment is low, the number of people working is steadily rising and wages are up."

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