WASHINGTON — The Federal Reserve raised interest rates by a quarter of a percentage point Wednesday and signaled it will raise rates two more times this year, as Fed Chairman Jerome Powell proclaimed the U.S. economy to be in “great shape” and that “most people who want to find jobs are finding them.”
Powell, speaking at a news conference after the Fed’s two-day meeting, said the economy has strenghtened significantly since the financial crisis and is approaching a “normal” level where monetary policy may no longer be needed to either encourage or discourage economic activity. The Fed now projects unemployment to fall to 3.6 percent in 2018 and indicated it will raise interest rates a total of four times this year.
That is a far different stance than just a decade ago, when the Fed cut interest rates to near zero in the wake of the financial crisis as it sought to stimulate an economy that had slipped into a recession.
“The economy is doing very well. Most people who want to find jobs are finding them,” Powell said. “Ongoing job gains are boosting wages and confidence.”
A statement released at the end of the Fed’s two-day meeting took several steps to show officials no longer view the U.S. economy as needing a boost and are instead beginning to worry more about the threat of inflation.
Quarterly economic projections released at the meeting showed that Fed officials expect the economy to grow at a 2.8 percent rate this year, up from a 2.7 percent forecast in March. Officials also now predict the unemployment rate to dip to 3.6 percent by year’s end, down from a forecast of 3.8 percent in March.
That continued strengthening prompted the Fed to signal an additional rate increase for 2018, for a total of four expected rate hikes in 2018.
Officials raised their headline inflation rate forecast for the year as well, to 2.1 percent from 1.9 percent. The Fed now predicts inflation will run slightly above its target rate of 2 percent through 2020, at 2.1 percent each year, a slight overshoot that Fed officials have roundly indicated they are comfortable with.