The economic news continues to get better and better for President Donald Trump as the Federal Reserve today announced an increase in short-term interest rates by a quarter percentage point, with two more hikes on the horizon according to CNBC Finance. This makes the current funds rate target between 1.75 percent to 2 percent, a rate that is highly dependent on average consumer debt, such as credit cards, home equity lines of credit, and other adjustable-rate lending engines. Rate increases of this nature usually reflect high consumer confidence, high ability to repay money to lenders, and strong job markets and stock markets.
Federal Reserve Chairman Jerome Powell held a press conference today to summarize the report and to deliver statements surrounding the economy and the incoming interest rate hike to media and stakeholders.
In a brief statement that clocked in at barely over 300 words, the Federal Open Market Committee upgraded their assessment of current health of the U.S. economy in a variety of different aspects. Although the usual debriefs offered up by the committee come in at 700-800 words, there was much to dissect in the findings they did release, particularly in comparison to past reports.
The committee updated an analysis made in May to say that economic growth has been “rising at a solid rate,” when previously they had found that the economy had been on “solid” footing. Household spending was revised to having “picked up” as opposed to “moderated,” and unemployment was said to have “declined” as contrasted to “stayed low.” Given that the numbers in May were enough to spur Fortune to proclaim that the U.S. unemployment rate was at the lowest point it had ever been in this century, these are impressive improvements to say the least.
The Fed has raised the interest rate once already in the March previous this year, and since then, the unemployment rate has dropped an additional 0.3 percent, resting at 3.755 percent. This represents a 48-year low, while the American economy has added 537,000 jobs during the past three months in the interim according to Yahoo! Finance.
Finally, the Fed dropped a cardinal bit of phrasing that has been a staple of their messaging for years. The boilerplate statement in question – “the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.” – saw a revision omitting “for some time” that had commonly been employed (most recently in the May update) to explain lower than usual interest rates and thus opportunities for market and capital investment.
With the removal of this pessimistic clause, it seems that even the stolid Fed is warming up to the possibility of long-term economic fecundity moving forward.
Presiding over an extremely healthy economy after a long period of stagnation following the financial crisis that closed out the previous decade and ran well into this one, the current administration has seen record-high stock market confidence, consumer confidence, and record low unemployment for several key demographics. While financial predictions always involve a bit of estimation and speculation, investors, consumers, and the Federal Reserve seem quite convinced that this economy is a strong one – strong enough to bear several successive rate hikes – and shows no sign of slippage in the near future.