Fed Announces Rate Hike

Mar 21, 2018

The first meeting of the Federal Reserve’s policymaking committee under the chairmanship of Jerome Powell has resulted in a new rate hike.

In a statement issued by the central bank’s Federal Open Market Committee, the unanimous decision was reached to “raise the target range for the federal funds rate to 1-1/2 to 1-3/4 percent.” In making this announcement, the Fed stated that the “economic outlook has strengthened in recent months,” adding that “with further gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace in the medium term and labor market conditions will remain strong.”

The Fed made no mention of housing in its announcement, nor did it address the controversy over the Trump Administration’s tariff policy. Instead, the committee said it “expects that economic conditions will evolve in a manner that will warrant further 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. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.”

"The tight labor market will hurry-along the Fed to raise rates," said NAR Chief Economist Lawrence Yun. "Housing costs are also rising solidly and contributing to faster inflation. The one thing that could slow the pace of rate increases would be to tame housing costs through an increased supply of new homes. Not only will more home construction lead to a slower pace of rate hikes, it will also lead to faster economic growth. Let’s put greater focus on boosting home construction.”

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Phil Hall

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Mar 21, 2018

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