The Fed says, “One More.”

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Federal Reserve Fed Bank building

As predicted, the U.S. Federal Reserve Fed voted on December 13, 2017, to raise the interest rate from 1.25% to 1.50%. The committee believes the labour market has continued to strengthen and that the gradual increase in rates will stimulate economic activity.

This is the fifth time the Fed increased rates since the financial crisis of 2008.

The outgoing Fed chair, Janet Yellen, will say goodbye to the committee on February 3, 2018, and all eyes are now on the incoming Trump-nominated chair, Jerome Powell.

The year 2017 has been an unprecedented one. On the one hand, inflation is low and stagnant suggesting the Fed should delay raising rates. On the other hand, economic growth and declining unemployment indicate increase rates. The policymakers are charged with playing “Goldilocks“, keeping rates not too high, not too low, but just right!

I do expect at least two rate hikes in 2018, as the Fed strive to stimulate economic growth of 2.5%, a revision from  2.1% previously forecast.

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