The US Federal Reserve raised interest rates for the third time this year on Wednesday, citing an improving economy and labour market.
At the end of the Federal Open Market Committee’s (FOMC) two-day meeting, it was announced that the benchmark interest rate would be increased by 25 basis points, to between 1.25% and 1.5%.
“In view of realised and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1?1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation,” said the FOMC in a statement today.
This decision was widely anticipated ahead of the announcement, and there is currently no evidence that the Fed plans to deviate from the three basis point hikes that are widely expected to take place in 2018.
Immediately following the announcement the US dollar slipped back against the euro and the euro and the Japanese yen. The Dollar Index dropped from 93.802 ahead of the FOMC decision to as low as 93.398 before ending the day at 93.444, according to Bloomberg.
Janet Yellen, the chair of the Fed, is set to be replaced in her current position by Jerome Powell, a member of the Fed board of governors, in February.