“Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the Committee decided to raise the target range for the federal funds rate to 1/4 to 1/2 percent,” the Fed said in a release. “The stance of monetary policy remains accommodative after this increase, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation.”
The Fed committee said economic activity has been expanding at a moderate pace; household spending and business investment have increased over the past few months.
The decision was also influenced by ongoing jobs gains and declining unemployment.
“The Committee currently expects that, with gradual adjustments in the stance of monetary policy, economic activity will continue to expand at a moderate pace and labor market indicators will continue to strengthen,” the Fed said. “Overall, taking into account domestic and international developments, the Committee sees the risks to the outlook for both economic activity and the labor market as balanced.”
The Fed also set out a future plan for the rate.
“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run,” the Fed said. “However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”
MBN
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