U.S. Federal Reserve Raises Interest Rates Despite Lower Inflation

The U.S. Federal Reserve has raised the target range for the federal funds rate to 1 percent to 1.25 percent from 0.91 percent, citing labor market conditions and inflation.

In a post-meeting statement, the central bank’s Federal Open Market Committee (FOMC) said that on a 12-month basis, inflation has declined and, like the measure excluding food and energy prices, is running somewhat below 2 percent.

The committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, and labor market conditions will strengthen somewhat further.

Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the committee's 2 percent objective over the medium term. Near term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely.

On top of the rate increase, the FOMC said it will begin the process this year of reducing its balance sheet, which it expanded by buying bonds and other securities in order to fight the housing crisis. 

Suggested Articles

Some of you might have already been aware of the news that Questex—with the aim to focus on event business—will shut down permanently all media brands in Asia…

Some advice for transitioning into an advisory role

Global risks are intensifying but the collective will to tackle them appears to be lacking. Check out this report for areas of concern