The US Federal reserve raised short – term interest rates again on Wednesday, the eighth such move since 2015, as the Central Bank moves to unwind years of historically low rates.
After a two-day meeting the Fed announced a quarter percentage point rise in its benchmark rate to a range of 2% to 2.25%. The rate is used to set credit card, mortgage and loan rates and will trigger rises across the board for consumers.
The increase is the third rate rise this year and comes as US unemployment has hit new lows. In August the US added 201,000 new jobs – a record-breaking 95th consecutive month of jobs growth – as the unemployment rate remained steady at 3.9%.
The rise pushed the Fed’s rate above 2% for the first time since 2008, when the central bank stepped in and cut rates to close to zero as it sought to tackle the recession triggered by the last financial crisis.
In a statement the Fed signaled more rate hikes were imminent. “The committee expects that further gradual increases in the target range for the federal funds rate will be consistent with sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee’s symmetric 2% objective over the medium term. Risks to the economic outlook appear roughly balanced,” the statement read.
The rate hike came despite Donald Trump’s explicit – and unprecedented – criticism of the Fed’s decision to increase interest rates. “I’m not thrilled with his raising of interest rates, no. I’m not thrilled,” Trump said in an interview with Reuters last month.
Due to the independence of the Fed, it is highly unusual for a sitting president to criticize its decisions. The Fed chair, Jerome Powell, defended the policy at a meeting of central bank heads in Jackson Hole, Wyoming, last month.
At a press conference on Wednesday Powell once again defended the Fed’s independence. Asked about Trump’s criticisms, Powell said: “We’ve been given a really important job to do. We’re focused exclusively on carrying out that mission.” He said the Fed’s mission was “to set monetary policy to achieve maximum employment in the context of price stability. That’s what we do. We don’t consider political factors.”
Powell said the Fed had heard a “rising chorus on concerns” about the Trump administration’s trade disputes from businesses but added that it was “hard to see much happening at this point”.