Federal Reserve Hikes Interest Rates by 0.25%, Drops “Accommodative” Term

Federal Reserve

The Federal Reserve raised US interest rates on Wednesday by 0.25 points, to a target range of 2% to 2.25% after a two-day policy meeting. This is the third interest rate hike this year and the eight since 2015.

The central bank has also hinted at a fourth hike before the end of the year, and three more in the coming year. Investors were highly expecting the Jerome Powell-led committee to raise the interest, given the current status of US economy.

“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low. Household spending and business fixed investment have grown strongly. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance,” the Federal Open Market Committee said in a statement released on Wednesday.

The bank uses the interest rate to determine loan, credit card, and mortgage rates for US consumers. It has also gotten rid of its longstanding “accommodative” term in its policy statement. This means that it could even pause later on to examine the impact of its decision on the economy.