A unanimous Federal Open Market Committee agreed Wednesday to increase the federal funds rate by 25 basis points to a 0.5% to 0.75% range, echoing a move made in December 2015 that raised rates to a target range of 0.25% to 0.5%.
In a statement, committee members cited a strengthening labor market and moderately expanding economic activity for the decision to raise rates, noting that market-based measures of inflation compensation “have moved up considerably but still are low.”
FOMC members cautioned in their statement that any further rate increases will be gradual “for some time.” Expectations for where rates will be in 2018 dipped slightly from a year ago, to 2.13% from 3.25%, according to projections accompanying the statement, signaling at least two possible rate hikes in 2017.
More change is likely to come next year, said Thanos Bardas, global head of sovereigns and interest rates at Neuberger Berman. “For the time being, it's one extra hike. I would expect to see more drastic changes in the March meeting because we will know more about the changes in the administration. There's enough uncertainty in terms of trade and fiscal policy, so it's too soon to model.”
