The Federal Reserve will almost certainly raise its short-term interest rate target by a quarter percentage point at the conclusion of its two-day policy meeting Wednesday.
The rate will be only the fifth interest rate hike since the Fed began to raise rates from its near-zero policy two years ago. A quarter percentage point hike would bring the Fed’s target to a range of between 1.25 percent and 1.5 percent. Raising rates is typically a sign that Fed officials believe the economy has strengthened.
Fed officials will also release new projections for economic growth, interest rates, inflation, and unemployment. This will give the public a view of where Fed officials believe the economy is headed in the coming years, perhaps including their views of the impact of tax cuts and potential deficits.
The Fed’s statements on inflation will be closely watched. In recent months, inflation has been running below the Fed’s target of 2 percent despite forecasts that it would accelerate as labor conditions tightened. Outgoing Fed chair Janet Yellen has described low inflation as “transitory,” which means she believes it is likely to rise again. But the persistence of low-inflation is challenging that view and Yellen will no doubt be asked about it in her press conference this afternoon.
This will mark Jannet Yellen’s final press conference before her term ends February 3, 2018. She may take the opportunity to speak about her long experience as a central banker, which has seen her occupy positions from staff economist, to the president of the San Francisco Fed, to vice chairwoman, to the top spot.