The Fed Raises Rates, With an Eye on Inflation
A year after the Federal Reserve boosted the key interest rate for the first time in nearly a decade, it has finally raised it again. The move is an indicator of the central bank’s confidence in the health of the U.S. economy. Specifically, it signals that Fed officials believe the labor market and inflation are on the right track.
The market broadly expected the Fed to finally increase rates again, with futures contracts implying more than a 97% chance late last week. This 25-basis-point hike puts the federal funds target rate between 0.50% and 0.75%.
Despite U.S. unemployment hovering at or below 5% for more than a year, the Fed held off on hiking rates for most of 2016 as low energy prices paired with global risks to keep inflation contained. But inflation expectations have picked up significantly in recent months, and global geopolitical conditions seem to be improving on the margin.
So, the message here is, get locked in as soon as possible, interests rates are still at record lows, but are expected to rise soon.
Dana in Lubbock