Wednesday the Federal Reserve announced it would raise the target interest rate range for federal funds to 2.25% to 2.5%. This 25 basis point increase is the 9th highest interest rate increase since the financial crisis, according to Yahoo Finance.
The new rate is effective Dec. 20, 2018.
“The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate pain on required and excess reserve balances to 2.40%,” the statement explains. “Setting the interest rate pain on required and excess reserve balances 10 basis points below the top of the target range for federal funds rate is intended to foster trading in the federal funds market at rates well within the Federal Open Market Committee’s target range.”
In related news the board approved a .25% point increase in the primary credit rate to 3.00%, also effective Dec. 20, 2018.
The Federal Reserve noted the labor market and household spending remains strong. However, growth of business fixed investment has moderated from its earlier rapid growth. On a 12-month basis inflation overall and inflation for non-food or energy items remains near 2%. The Fed doesn’t expect longer-term inflation to change much.
The rate increase came over the objections of President Donald Trump who, in a tweet, urged the Fed to “Feel the market, don’t just go by meaningless numbers.”