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FOMC Raises Rates, As Expected

As most were expecting, the Federal Reserve raised its target rate up 0.25 percent to a range of 0.50 to 0.75 percent. The assessments of the economy are roughly the same as the November meeting, with jobs gains described as “solid”, household spending called “moderate” and business investments still “soft”. Inflation is also described as mostly soft, though the inflation compensation got an upgrade; the inflation compensation is the yield difference between inflation-protected securities and regular securities. The committee still sees the economy as expanding at a moderate pace and sees near term risks as roughly balanced. The vote to raise rates was unanimous, 10 to 0. The FOMC forecasted up to three rate hikes for the next year, up from the two predicted in September. Inflation forecasts are unchanged but the unemployment rate forecast has been lowered.

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