Fed Hikes Interest Rates for 4th Time This Year

The Federal Reserve will raise interest rates for the fourth time this year following the two-day meeting of its policymaking body, but it expects fewer hikes next year.

The Federal Open Market Committee unanimously voted Wednesday to raise the benchmark rate to a target range of 2.25 to 2.5 percent. The committee’s decision was nearly a foregone conclusion leading up to the meeting as economic indicators painted a strong U.S. economy in the final quarter of 2018, but the Fed also downgraded its outlook for 2019.

While strong job gains, growing household spending, moderating business investment and stable inflation played into the Fed’s decision to hike interest rates this month, the central bank also scaled back the number of times it intends to raise interest rates in 2019 from three to two, signaling declining confidence in economic growth next year.

The Fed based its outlook on a set of economic projections it releases every quarter. Compared with predictions made in September, the Fed downgraded GDP growth for 2018 from 3.1 to 3 percent. It expects 2019 GDP to decrease to 2.3 percent, lower than its September prediction of 2.5 percent. However, unemployment is forecast to remain at 3.5 percent throughout next year.

The Fed has factored a range of economic threats into its long-term decision-making. They include continued volatility in equity markets, soaring corporate debt, the U.K.’s departure from the European Union, and the trade dispute with China. In light of a potential slowdown, the FOMC said it would continue to monitor global economic and financial developments and factor them into future forecasts.

December’s meeting minutes will become available in three weeks. The next meeting of the FOMC will take place Jan. 29-30.