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| Fed Raises Interest Rates for Sixth Time Since Financial Crisis | Fed Raises Interest Rates for Sixth Time Since Financial Crisis |
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| The Federal Reserve raised interest rates on Wednesday by a quarter of a percentage point and signaled that the central bank is on track to raise rates another two times in 2018, while expressing increased confidence in the economic recovery. | The Federal Reserve raised interest rates on Wednesday by a quarter of a percentage point and signaled that the central bank is on track to raise rates another two times in 2018, while expressing increased confidence in the economic recovery. |
| ■ The Fed said it would raise its benchmark interest rate to a range of 1.5 percent to 1.75 percent, marking the sixth time since the financial crisis that it has raised rates. | ■ The Fed said it would raise its benchmark interest rate to a range of 1.5 percent to 1.75 percent, marking the sixth time since the financial crisis that it has raised rates. |
| ■ The Fed said at the conclusion of a two-day policy meeting that it expects to increase rates another two times this year as it continues its climb back to more normal interest rate levels. Officials also increased their expectations for economic growth this year in the United States, declaring that “the economic outlook has strengthened in recent months”. They said they expect to raise interest rates three times next year, an increase from the two increases in 2019 that they forecast in December. | ■ The Fed said at the conclusion of a two-day policy meeting that it expects to increase rates another two times this year as it continues its climb back to more normal interest rate levels. Officials also increased their expectations for economic growth this year in the United States, declaring that “the economic outlook has strengthened in recent months”. They said they expect to raise interest rates three times next year, an increase from the two increases in 2019 that they forecast in December. |
| ■ Jerome H. Powell will provide remarks following his first policy meeting as Fed chairman. Mr. Powell, a former Fed governor, succeeded Janet L. Yellen last month. Analysts do not expect him to deviate from Ms. Yellen’s preferred path of slow and steady rate increases, nor to wade too deeply into controversial topics, such as the tariffs announced by President Trump. | ■ Jerome H. Powell will provide remarks following his first policy meeting as Fed chairman. Mr. Powell, a former Fed governor, succeeded Janet L. Yellen last month. Analysts do not expect him to deviate from Ms. Yellen’s preferred path of slow and steady rate increases, nor to wade too deeply into controversial topics, such as the tariffs announced by President Trump. |
| The Fed, under Ms. Yellen, pursued gradual rate increases and a highly choreographed sell-off of the portfolio of bonds it bought to help prop up the economy after the 2008 financial crisis. Mr. Powell was among the governors who voted for that approach, and the announcement on Wednesday signaled he will maintain it, particularly if economic growth continues to accelerate and unemployment remains at or below the 4.1 percent level it reached in February. | The Fed, under Ms. Yellen, pursued gradual rate increases and a highly choreographed sell-off of the portfolio of bonds it bought to help prop up the economy after the 2008 financial crisis. Mr. Powell was among the governors who voted for that approach, and the announcement on Wednesday signaled he will maintain it, particularly if economic growth continues to accelerate and unemployment remains at or below the 4.1 percent level it reached in February. |
| The announcement underscores the Fed’s gathering confidence in the economy as well as its focus on the potential for inflation, which has remained persistently muted throughout the expansion. Officials raised their median estimates for economic growth this year to 2.7 percent, up from 2.5 percent in December. They raised their estimate for growth in 2019 to 2.4 percent, up from 2.1 percent. They now expect the unemployment rate to fall to 3.8 percent this year and 3.6 percent in 2019, a low level by historical standards. In December, officials said they expected unemployment to be 3.9 percent both this year and next. | The announcement underscores the Fed’s gathering confidence in the economy as well as its focus on the potential for inflation, which has remained persistently muted throughout the expansion. Officials raised their median estimates for economic growth this year to 2.7 percent, up from 2.5 percent in December. They raised their estimate for growth in 2019 to 2.4 percent, up from 2.1 percent. They now expect the unemployment rate to fall to 3.8 percent this year and 3.6 percent in 2019, a low level by historical standards. In December, officials said they expected unemployment to be 3.9 percent both this year and next. |
| Officials’ growing optimism tracks with the expectations of many Wall Street analysts. “We think Fed officials will view the growth and inflation data in recent months as encouraging,” analysts at Goldman Sachs wrote in a research note ahead of the meeting, “particularly with tax cuts now implemented and with an additional fiscal boost from federal spending arriving this year.” | Officials’ growing optimism tracks with the expectations of many Wall Street analysts. “We think Fed officials will view the growth and inflation data in recent months as encouraging,” analysts at Goldman Sachs wrote in a research note ahead of the meeting, “particularly with tax cuts now implemented and with an additional fiscal boost from federal spending arriving this year.” |
| Fed officials indicated they are likely to raise rates a total of three times in 2018, in keeping with their projections in December. But officials were divided, with slightly less than half indicating they expect to raise rates at least four times this year. By a slim margin, officials said they expect an additional rate increase to come in 2019, for a total of three increases that year. | Fed officials indicated they are likely to raise rates a total of three times in 2018, in keeping with their projections in December. But officials were divided, with slightly less than half indicating they expect to raise rates at least four times this year. By a slim margin, officials said they expect an additional rate increase to come in 2019, for a total of three increases that year. |
| Some analysts say a short-term economic stimulus from Congress — in the form of a $1.5 trillion tax cut and federal spending increases — could eventually push the Fed to add a fourth rate move. | Some analysts say a short-term economic stimulus from Congress — in the form of a $1.5 trillion tax cut and federal spending increases — could eventually push the Fed to add a fourth rate move. |
| A portion of the voting membership of the committee rotates every year among the Fed’s regional bank presidents. The new members tend to worry more about inflation than those they replaced. Even some members who have fretted more about growth than inflation appear to be shifting their calculus. | A portion of the voting membership of the committee rotates every year among the Fed’s regional bank presidents. The new members tend to worry more about inflation than those they replaced. Even some members who have fretted more about growth than inflation appear to be shifting their calculus. |
| Lael Brainard, a Fed governor who has been less hawkish than many of her colleagues, said in a speech this month that in many ways, “today is the mirror image of the environment we confronted a couple of years ago.” | Lael Brainard, a Fed governor who has been less hawkish than many of her colleagues, said in a speech this month that in many ways, “today is the mirror image of the environment we confronted a couple of years ago.” |
| “In the earlier period, strong headwinds sapped the momentum of the recovery and weighed down the path of policy,” she added. “Today, with headwinds shifting to tailwinds, the reverse could hold true.” | “In the earlier period, strong headwinds sapped the momentum of the recovery and weighed down the path of policy,” she added. “Today, with headwinds shifting to tailwinds, the reverse could hold true.” |
| Fed officials signaled in several ways that they see the economy strengthening. Along with raising their growth forecasts, they declared in a statement that “economic activity has been rising at a moderate rate” and that “job gains have been strong in recent months.” In January, officials described both economic activity and job growth as “solid.” | |
| The statement also declared, in a change from January, that “the economic outlook has strengthened in recent months.” It said officials expect the inflation rate to move up “in coming months.” In January, officials said they expected inflation to increase “this year.” | The statement also declared, in a change from January, that “the economic outlook has strengthened in recent months.” It said officials expect the inflation rate to move up “in coming months.” In January, officials said they expected inflation to increase “this year.” |
| That increased optimism appears to downplay lingering uncertainties in the recovery, including structural issues like a ballooning debt load and trade barriers that could turn the economy’s tailwinds back into headwinds. Recent data suggest that economic growth is falling short of expectations for the first quarter. Wage growth appears to be improving, but the signs are mixed. Markets have been rattled in recent weeks by Mr. Trump’s tariff plans and embrace of a potential trade war. | That increased optimism appears to downplay lingering uncertainties in the recovery, including structural issues like a ballooning debt load and trade barriers that could turn the economy’s tailwinds back into headwinds. Recent data suggest that economic growth is falling short of expectations for the first quarter. Wage growth appears to be improving, but the signs are mixed. Markets have been rattled in recent weeks by Mr. Trump’s tariff plans and embrace of a potential trade war. |
| Though this will be his first news conference as Fed chairman, Mr. Powell has already faced tough questioning during two days of congressional hearings in February and March. He struck a careful tone in those appearances, saying he had upgraded his own economic outlook but saw no evidence yet of overheating in the economy. | Though this will be his first news conference as Fed chairman, Mr. Powell has already faced tough questioning during two days of congressional hearings in February and March. He struck a careful tone in those appearances, saying he had upgraded his own economic outlook but saw no evidence yet of overheating in the economy. |
| Mr. Powell also offered only gentle criticism of Mr. Trump’s planned tariffs on imported steel and aluminum. He praised free trade in general, while acknowledging that it had hurt some workers by shifting jobs overseas, and added, “The best approach is to deal directly with the people who are affected rather than falling back on tariffs.” | Mr. Powell also offered only gentle criticism of Mr. Trump’s planned tariffs on imported steel and aluminum. He praised free trade in general, while acknowledging that it had hurt some workers by shifting jobs overseas, and added, “The best approach is to deal directly with the people who are affected rather than falling back on tariffs.” |
| Reporters are likely to push Mr. Powell more on that subject, especially with Mr. Trump’s tariffs scheduled to take hold this week and the administration readying a round of trade penalties aimed directly at China. Analysts expect him not to rock markets with any surprise opinions, in line with his performance in front of Congress. | Reporters are likely to push Mr. Powell more on that subject, especially with Mr. Trump’s tariffs scheduled to take hold this week and the administration readying a round of trade penalties aimed directly at China. Analysts expect him not to rock markets with any surprise opinions, in line with his performance in front of Congress. |
| “He came off fairly polished in that, as if he wasn’t nervous about being there,” said Tim Duy, a University of Oregon economist who writes the Fed Watch blog. “I would expect him to be similar in this news conference. He’s not going to drop any bombshells.” | “He came off fairly polished in that, as if he wasn’t nervous about being there,” said Tim Duy, a University of Oregon economist who writes the Fed Watch blog. “I would expect him to be similar in this news conference. He’s not going to drop any bombshells.” |