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Economy in Brief

FOMC Hikes Interest Rates
by Tom Moeller  December 19, 2018

The Federal Open Market Committee voted unanimously at today's meeting to increase the federal funds rate target by 25 basis points to a range between 2.25% and 2.50%. It was the ninth increase since December 2015. The action was expected in the Action Economics Forecast Survey.

Most FOMC members indicated an inclination to raise interest rates in the future. The Fed also indicated that global economic & financial developments will be monitored closely, while assessing their implications for the economic outlook, a reference it previously did not make.

As indicated at the last meeting, the FOMC noted "that the labor market has continued to strengthen and that economic activity has been rising at a strong rate. Meanwhile, "overall inflation and inflation less food & energy remain near 2 percent. Indicators of longer-term inflation expectations are little changed, on balance."

Consumer price inflation, both overall and excluding food & energy, continued to be seen at 2% through 2021. Longer-term inflation expectations were seen as steady.

The Fed indicated that "risks to the economic outlook are roughly balanced."

Updated economic projections were offered at this meeting. Projections included real GDP growth of 3.0% this year, revised from 3.1%, 2.3% in 2019, revised from 2.5% and unrevised expectations of 2.0% in 2020 and 1.8% in 2021. The expected core PCE inflation rate was 1.9% this year and 2.0% thereafter, revised from 2.1%. The civilian unemployment was seen at 3.7% this year, followed by 3.5% in 2019, 3.6% in 2020 and 3.8% in 2021, revised from 3.7%.

The press release for today's FOMC meeting can be found here.

The Action Economics Forecast Survey can be found in the AS1REPNA database. Haver's SURVEYS database contains the economic projections from the FOMC.

Current Last 2018 2017 2016 2015
Federal Funds Rate Target 2.25% - 2.50% 2.00% - 2.25% 1.82% 1.00% 0.40% 0.13%
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