The Federal Reserve today raised its federal funds rate target by 25 basis points, to 2.5% from 2.25%, its sixth straight increase since June. The committee also unanimously approved a 25-basis-point increase in the discount rate, to 3.5%. The policy-setting Federal Open Market Committee said in a statement that economic growth and rising prices remain balanced, adding: "With underlying inflation expected to be relatively low, the committee believes that policy accommodation can be removed at a pace that is likely to be measured."
"One side thing they're probably looking at that they don't mention is the (U.S.) dollar and its weakness, and the idea that maybe they need to shore up the dollar because that could become a risk to inflation if it started falling faster," said Rich King, head of portfolio management at INVESCO Fixed Income Investment Management. "Also, the fact that we're running a big budget deficit, they're concerned about that to some degree as well."
