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The Federal Reserve has lowered its benchmark interest rate for the first time since 2008.
The Federal Reserve raised the benchmark rate by a quarter-point on Monday to a range of 1.75 to 1.85 percent.
The move signals a welcome return to normalcy to U.S. economic growth, but the Federal Reserve still expects the economy to grow by a meager 0.4 percent this year.
While the Federal Open Market Committee has been signaling for some time that it was poised to raise rates this year, the Fed was widely expected to raise them just before Thanksgiving.
While there are a few other factors that are working in the Fed’s favor, it seems to have finally caught up to expectations that its previous hike in December had caused some turbulence in the housing market.
While stocks fell as much as 7.5 percent on Monday, that was offset by gains in home construction, which has increased since the Fed raised rates earlier this year and the housing sector is now projected to add 5.3 million jobs this year according to a Bloomberg survey of economists.
On Wednesday, the FOMC’s policy makers will discuss its outlook for the economy in more detail.
The central bank raised interest rates twice in January and February after it said it would take another step toward a gradual reduction in the pace of economic growth.
At the time, the Federal Deposit Insurance Corporation warned that a second round of rate hikes could hurt mortgage lending, which is a key pillar of the U.K. and U.C. Berkeley economies.
The FOMCs rate-setting committee has been deliberating on its next steps for more than a year, and on Friday, it released its report, which was expected to show that the economy was growing at an annual rate of 1 percent or more.
While that is encouraging, the report does not address the likely impact of another round of Fed rate hikes.
“The committee is not likely to raise its key rate again until the end of the year, although a rate increase is likely to be considered in the context of the Committee’s balance sheet, particularly given the recent strengthening of the labor market and economic outlook,” the FomCs report said.
“It remains unclear whether a rate hike will be needed to continue to strengthen the labor and housing markets, and to further drive growth.”
There are other risks to the outlook, including the uncertain nature of the economy, the uncertain outlook for inflation, and the risks of an inflationary shock from fiscal policy.”
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