As expected, the Federal Open Market Committee (FOMC) boosted its target for short-term interest rates Thursday (June 30) by a quarter percentage point to 3.25% and signaled further rate hikes are coming.
According to a CBS MarketWatch report, the Federal Reserve’s policymaking committee left its post-meeting statement largely unchanged from May’s statement. The committee said current rates remain “accommodative” and said once again that it believes rates can be raised at a “measured pace.”
The vote to raise rates was unanimous. It was the ninth straight meeting at which the FOMC raised rates by a quarter point after the fed funds reached a four-decade low of 1% in mid-2003.
Other lending rates are expected to follow suit, including a quarter-point increase in the benchmark prime rate to 6.25%.
The FOMC said the risks of higher inflation and weaker growth would remain balanced if appropriate policies are followed. The committee slightly modified its assessment of the economy from the May statement, reflecting recent moderate inflation data and a more upbeat outlook for the economy.
“Although energy prices have risen further, the expansion remains firm and labor market conditions continue to improve gradually,” the committee said. “Pressures on inflation have stayed elevated, but longer-term inflation expectations remain well contained.”
Economists said there was no hint of a near-term pause in the tightening cycle, as many have expected.
“If anything, the hint is the other way,” said Ian Shepherdson, chief U.S. economist for High Frequency Economics.
“This is not a group that is one move way from pausing,” said Anthony Karydakis, chief U.S. economist for J.P. Morgan Asset Management. “It’s hard to believe they will pause before they get to 3.75% or possibly 4%.
He added, “We should take the statement on inflation very seriously.”