Business: Fed Inches U.S. Rates Up

Central-bank officials voted unanimously to lift the benchmark federal-funds rate to a range between 2% and 2.25%. Most expected to raise rates one more time this year.

The latest increase, the third this year, is the first time the Federal Reserve has raised its benchmark rate above 2% since 2008.

“These rates remain low,” Fed Chairman Jerome Powell said. “This gradual return to normal is helping to sustain this strong economy for the longer-run benefit of all Americans.”

From reporter Nick Timiraos: President Trump expressed annoyance that the central bank keeps raising rates. The chilly relations might not thaw anytime soon. Fed officials expect they will need to raise rates a further percentage point through 2019. The Fed is raising rates a touch faster than was anticipated a year ago because of a burst of fiscal stimulus. Many officials think recent tax cuts will boost the economy in the short run but not permanently, as the White House does. But even if officials agreed that tax cuts were increasing the economy’s long-run capacity to grow, this would raise the so-called neutral level of interest designed to neither spur nor slow growth. That, in turn, would require higher rates over time to keep the economy on an even keel. The bottom line: Short-term rates are likely to continue rising until the economy slows