The US Federal Reserve Bank has raised short-term interest again on Wednesday, as the Central bank moves to unwind years of historically low rates.
Officials increased the target for the bank’s benchmark rate by 0.25%, to a range of 2%-2.25%, which is the eight rate increase since 2015. The rate is set to credit cards, mortgage and loan rates, and it will even trigger rises across-the-board for consumers.
Although the U.S added 201,000 new jobs in August, the unemployment rate remained steady at 3.9%, and as such, this increase comes as US unemployment hit new lows.
However, for the first time since 2008, the rise pushed Fed’s rate above 2% when the central bank stepped in and cut rates to close to zero during its quest to tackle the recession triggered by the last financial crisis.
In a statement, the Fed said that ” The committee expects that further gradual increases in the target range for the federal funds will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective over the medium term. Risks to the economic outcome appear roughly balanced.”
The rate hike came despite President Donald Trump’s statement in an interview last month, when he said that “I’m not thrilled with this raising of interest rates, no. I’m not thrilled.”
Moreover, considering the fact that Fed is an independent organisation, its chairman, Jerome Powell, stood in defence of the policy at a meeting of Central Bank Heads in Jackson Hole, Wyoming, last month. Fed’s independence makes it highly unusual for a sitting president to criticize its decision.
Powell said that “The Fed’s mission is to monetary policy to achieve maximum employment in the context of price stability.”