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story.lead_photo.caption “We don’t consider political factors,” Fed Chairman Jerome Powell said Wednesday, noting that regulators are “focused exclusively” on full employment and stable prices.

WASHINGTON -- The Federal Reserve raised interest rates a quarter point Wednesday, as officials indicated that the central bank is highly likely to increase rates again in December and three more times next year, bucking President Donald Trump's request to hold off.

The Fed stressed repeatedly that the U.S. economy is "strong" across the board and no longer needs the heavy stimulus the central bank put into place during the recession.

The raise increases the federal funds rate from a range of 1.75 percent to 2 percent to a range of 2 percent to 2.25 percent, the highest level in a decade and likely to be felt by Americans who have a lot of debt or are seeking bank loans. After the Fed boosts the federal funds rate, interest rates on credit cards, mortgages and small-business loans typically rise, as well.

"I am not happy about [the rate increase]," Trump said Wednesday afternoon at a news conference after his United Nations meetings. "I'm worried about the fact that they seem to like rising interest rates. We can do other things with the money."

The Fed, created by Congress in 1913, has for a generation been given a wide berth to set monetary policy without interference from elected officials. It has frequently frustrated presidents by raising borrowing costs without regard for election cycles.

At a news conference after the Fed's decision, Fed Chairman Jerome Powell said U.S. central bankers were "focused exclusively" on its mandate to pursue full employment and stable prices.

"We don't consider political factors," Powell said when asked about pressure from Trump to keep rates low. "That's who we are. That's what we do. And that's just the way it's always going to be for us."

The Fed also increased its growth projections for this year and next, an indication that it sees little sign that the trade war, rising oil prices or political turmoil will derail the economy. The U.S. economy is expected to grow 3.1 percent this year, the Fed said, which would be the first time the economy topped the 3 percent mark for annual growth since 2005.

"Our economy is strong. Growth is running at a healthy clip, unemployment is low. The number of people working is rising steadily, and wages are up. Inflation is low and stable. All of these are very good signs," Powell said Wednesday, adding that it is a "particularly bright moment" for the U.S. economy.

When asked about the escalating trade war, Powell said businesses are expressing a lot of concern about higher costs and disruption to their supply chains, but he emphasized that the damage isn't showing up in the hard data yet. His main worry is that Trump's trade battle with China and other nations could result in more, not fewer, trade barriers.

"Where is this going? If the end place we get to is lower tariffs, that would be good," Powell said. "If this goes to a thing where we have widespread tariffs that remain in place for a long time, that's going to be bad for the U.S. economy and American workers."

Despite trade concerns, the Fed projects a rosy period for the economy in the coming years. Trump's goal is to have annual growth hit 3 percent, and the White House predicts it will stay at that level for about a decade. The Fed, however, anticipates growth falling back to 2.5 percent in 2019, 2 percent in 2020 and 1.8 percent in 2021 as the benefits of this year's tax cut fade.

But the Fed is optimistic that it can steer the economy to avoid a recession.

"The odds are rising that the Fed can pull off a soft landing for the economy," said Ryan Sweet, head of monetary policy research at Moody's Analytics.

In a telling signal, the Fed deleted the line from its statement that said monetary policy will "remain accommodative," an indication that the Fed believes it's getting closer to the so-called neutral level of interest rates where policy doesn't help or hurt the economy.

Powell downplayed the significance of the move, saying that policy is still slightly stimulative and that the latest rate increase was not an attempt to cool the economy. Stocks retreated slightly as he spoke with the S&P 500 closing down 0.3 percent.

Trump has urged Powell, his appointee, not to raise rates further, but the central bank is an independent agency that shows no sign of bowing to presidential pressure. Twelve of the Fed's 16 leaders now anticipate another rate increase by the end of the year.

"Consumers should bank on rates for consumer loans rising an additional full percentage point starting in December of this year," said Robert Frick, an economist at Navy Federal Credit Union.

It's an ongoing question how high the Fed will take interest rates. Fed leaders released new projections Wednesday showing the neutral level for interest rates is 3 percent, a level they are likely to hit within the next year. If they go beyond that, business leaders are likely to read that as a sign that the Fed is concerned that the economy is overheating and inflation is picking up too much and the central bank wants to reign that in.

The Fed doesn't foresee interest rates going much above 3.25 percent to 3.5 percent in the coming years, although central bankers stress that they will adjust policy depending upon what happens with the economy.

For now, the Fed is predicting unemployment will fall to 3.7 percent this year and 3.5 percent next year and that inflation will remain modest at 2.1 percent this year and 2 percent next year.

Information for this article was contributed by Heather Long of The Washington Post and by Christopher Condon and Steve Matthews of Bloomberg News.

A Section on 09/27/2018

Print Headline: Fed taps interest rates up by 0.25%

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  • mrcharles
    September 27, 2018 at 10:30 a.m.

    Saved from the W economy that was losing how many hundreds of thousands of jobs every month?

    Who says French Hill doesnt have influence , the Society of Bankers Who Live in Better Than Average Homes, welcomes interest rates to manipulate to suck up the regular man's wages.