Yellen: Strong economy warrants gradual interest rate increase
WASHINGTON – Federal Reserve Chairwoman Janet Yellen said the U.S. economy is strong enough to warrant a modest interest rate increase.
“Our decision to make another gradual reduction in the amount of policy accommodation reflects the economy’s continued progress toward the employment and price stability objectives assigned to us by law,” Yellen said at a news conference on Wednesday.
“For some time the committee has judged that if economic conditions evolve as anticipated gradual increases in the federal funds rate would likely be appropriate to achieve and maintain our objectives. Today’s decision is in line with that view,” she added.
The Federal Reserve Bank on Wednesday announced that its Federal Open Market Committee had voted to raise interests rates 0.25 percent.
“In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 3/4 to 1 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation,” the statement said.
The Open Market Committee debated the proposal for two days before voting. The committee previously voted to raise interest rates by the same margin last December.
The Fed has historically kept interest rates low when the economy is sluggish to encourage borrowing. The Fed has historically raised interest rates when the economy is strong so as to keep pace with inflation.
U.S. stock market indexes as of late are booming and the Dow Jones Industrial Average has exceeded or slightly dropped below 21,000 since President Donald Trump took office in late January.
Following Wednesday’s announcement the DJIA, NASDAQ Composite and the S&P 500 all substantially increased.
This article is republished with permission from Talk Media News
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