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Fed Interest Rates Rise Again — the Third 2018 Rate Hike

posted on October 2, 2018 in Financial

What to expect after the latest federal interest rate increase

 


Source: CNBC

Last week, the Federal Reserve raised its federal funds rate target range a quarter percentage point, 2.00–2.25%, marking the third interest rate hike of the year.

The decision to raise the interest rate did not come as a surprise. Many financial experts were expecting two more rate hikes by year’s end, one in September and one near the end of the year.

That fourth expected rate hike now looks even more likely. In June, policy makers were split on the idea of a fourth rate increase. Now, the majority’s in favor. Federal Open Market Committee (FOMC) dot plot projections put the next rate hike in December, along with three less certain interest hikes in 2019.

The good news

This year’s rate hikes are signs of increased confidence in the US economy. Unemployment is low; growth potential is high.

The bad news

Home buyers will have to adjust their budgets to account for rising mortgage rates. However, with demand still sky high, the housing market remains stable.

Additionally, the Fed raised economic growth projects from 2.8% to 3.1% for the year, but expects a slowdown in 2019–2020. The current growth projection for 2021 is 1.8%.

 

 

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