Washington: The US Federal Reserve has increased the key short-term interest rates for the fourth-time this year, defying President Donald Trump who has repeatedly attacked the central bank for even considering such a move.
According to Federal Reserve Chairman Jerome Powell, the world's largest economy continued to strengthen this year, roughly in line with expectations.
"Today we raised our target range for the short-term interest rates by another quarter of a percentage point," Powell told reporters here.
"After today's action, the target range for the federal funds rate is 2.25 per cent to 2.5 per cent, putting it at the lower end of the range of estimates of the longer run normal rate provided by the committee," he said Wednesday.
The quarter-point increase will mean higher borrowing costs for many consumers and businesses.
The Fed's move, in spite of warnings from President Trump, seems certain to anger him. Wall Street shares fell sharply after the announcement by the central bank.
In a tweet on Tuesday, Trump urged the Fed not to "make yet another mistake".
"I hope the people over at the Fed will read today's Wall Street Journal Editorial before they make yet another mistake. Also, don't let the market become any more illiquid than it already is. Stop with the 50 B's. Feel the market, don't just go by meaningless numbers. Good luck!" the president said on Twitter.
After the Fed's announcement, Powell said Trump's tweets and statements would have no bearing on the central bank's policymaking.
Over the next year, if events play out broadly as expected, the federal funds rate will be in a range in which judgments of people both inside and outside the Fed will sometimes differ regarding whether the stance of policy is mild-modestly accommodative, neutral or modestly restrictive, Powell said.
When rates are in this range, he said Federal Open Market Committee (FOMC) makes policy in light of the array of diverse views on the committee. A committee within the Federal Reserve System, FOMC is charged under the United States law with overseeing the nation's open market operations.
"Moving forward, my colleagues and I will be watching the economy closely for indications that the stance of policy is appropriate to sustain the expansion with a strong labour market and inflation near two per cent," Powell said.
Observing that neither the pace nor the ultimate destination of any further rate increases is predetermined, Powell said the Fed will adjust monetary policy as best it can to keep the expansion on track, the labour market strong and inflation near two per cent.
"We know that our policy decisions affect all-American families and businesses, and we'll continue to make our decisions objectively and based solely on the best information and analysis," he said.
Powell said that three years ago the committee came to the view that the best way to achieve Fed's mandate was to gradually move interest rates back to levels that are more normal in a healthy economy.
"Today we raised our target range for the short-term interest rates by another quarter of a percentage point. As I've mentioned, most of my colleagues expect the economy to continue to perform well in the coming year.
"Many FOMC participants had expected that economic conditions would likely call for about three more rate increases in 2019. We have brought that down a bit and now think it is more likely that the economy will grow in a way that will call for two interest rate increases over the course of next year," the Federal Reserve Chairman said.
Powell emphasised that Fed's policy decisions are not on a preset course and will change if the incoming data materially changed the outlook. And given recent developments, the statement notes that we will continue to monitor global economic and financial developments and assess their implications for the economic outlook.
Since September, he said, the US economy has continued to perform well, roughly in line with its expectations.
The economy has been adding jobs at a pace that will continue bringing the unemployment rate down over time, he said.
"Wages have moved up for workers across a wide range of occupations, a welcome development. Inflation has remained low and stable and is ending the year a bit more subdued than most had expected. Although some American families and communities continue to struggle, and some longer-term economic problems remain, the strong economy is benefiting many Americans," Powell added.