The Federal Reserve announced on Tuesday that it is increasing its benchmark interest rate by a quarter of a point, raising the target range for the federal funds rate to .75 to one percent. This the third increase of the benchmark since the Great Recession.
At a press conference following the rate increase, Federal Reserve Board Chair Janet Yellen said, “The simple message is the economy is doing well. We have confidence in the robustness of the economy and the resilience to shocks.”
In making its decision, the Federal Reserve’s Federal Open Market Committee noted that the labor market continues to strengthen and economic activity is expanding at a moderate pace. It also highlighted solid job gains, a stable unemployment rate, and modest increases in household spending, while business-fixed investment has firmed somewhat. Inflation is also nearing the committee’s longer-term objective of two percent; excluding energy and food prices, it has not changed much and runs below two percent.
“I view the Fed’s actions in raising short-term rates and Chair Yellen’s comments regarding the rate increase and near term expectations very positively,” says Marc Simon, CEO of distributor HALO Branded Solutions. “It is heartening to know that the broader economy is strong and growing. Cautious as the Fed has been, its willingness to increase rates shows great confidence in the economy’s prospects. Further, the Yellen remarks will likely serve as a self-fulfilling prophesy to further enhance growth. All of this is likely to put more wind at the backs of our industry’s participants. As our clients focus on growth with more confidence, they will turn to where they get the biggest and best bang for their buck—promotional products!”
In its announcement of the rate increase, the committee forecasts that with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor market conditions will strengthen somewhat further, and inflation will stabilize around two percent over the medium term. It also noted that near-term risks to the economic outlook were roughly balanced.