The Federal Reserve is expected to raise interest rates -- first suddenly, then gradually.
The big moment is finally here: the Federal Reserve is about to make a big push upwards with interest rates for the first time since the recession began back in 2008 — and some people are worried.
The Federal Open Market Committee in September charted out a path for raising interest rates, and they’re planning on four interest rate hikes per year through the end of 2018 — quite a rapid pace considering that rates have been at zero for years, but not as fast as they were raised in 2004 through 2006, according to a Bloomberg report.
The rate peaked at 5.25 percent in 2006, before it plummeted down to zero when the market crashed in 2007 and 2008. It’s been sitting at zero ever since then as the Fed has tried to jump start the economy. Now that the labor market looks strong and the economy appears to be on a steady upward trend, the Fed is now focused on preventing inflation.
Economists can’t seem to agree on whether the Fed is right about the likely pace of inflation, or even if Federal Reserve Chair Janet Yellen is accelerating the interest rate too quickly or not quickly enough.
But one thing most of the economists agree on is that the Fed will hike the interest rate by a quarter point, bringing to an end seven years of rates at near zero. That will certainly mark a major milestone for the U.S. economy. That raise in the interest rate is likely to happen on Wednesday.
The second rate increase is expected in March, most economists believe, although the Fed didn’t lay out a specific schedule. She said it would be a “gradual” rise in interest rates.
Fed officials said in September that the interest rate would probably settle at about 3.5 percent, which will be partially offset by 2 percent of inflation, making it a 1.5 percent increase in real terms.