In a clear sign that the Federal Reserve is actively taking steps to slow down the U.S. economy in its ninth year of expansion, the Fed approved a rate hike on Wednesday, raising interest rates another quarter point. The new short-term interest rate sits at 1.75 to 2.0 percent. Some members of the Federal Reserve Board are recommending at least two additional interest rate increases this year. That rate is important, since it provides the signal across the economy for rising interest rates on things like home mortgages and credit card balances.
This is the second time since February that new Federal Reserve Chairman Jerome Powell has raised the interest rate. The monetary policy of the nation’s central bank is a delicate thing – raise interest rates too fast, and inflation will become an economic hazard. The latest cautious increase is the result of the recent two-day meeting of the Federal Reserve Board, which also mapped the country’s economic outlook. The nation’s jobless rate stands at 3.8 percent, extending a continuous drop from the historic levels of 2009-2010, and represents a 50-year low.
The 15-member Federal Reserve Board is not a unanimous body, and the rising tide of geopolitical threats have revealed a divided membership. The more hawkish members say the December tax cut package will boost the economy. More cautious members are concerned that the recent tariffs on steel and aluminum will spark a trade war, if it hasn’t already, affecting key elements of the economy, including agricultural products intended for foreign markets.
No one knows how long the roaring economy can continue; only that at some point, the country will slide into another recession. The Federal Reserve is trying to raise interest rates, kept artificially low for years as the country dug out of the deepest recession since the Great Depression, so it will have some means to stimulate the economy should it slide south again.