June 18, 2018 — Interest Rates Go Up another 25 Basis Points

JUNE 18, 2018 – INTEREST RATES GO UP ANOTHER 25 BASIS POINTS

The FOMC met Wednesday with all eight voting members agreeing to raise the benchmark interest rate by 0.25 percent to a range of 1.75-2.00 percent.  Rates are the highest since September 2008.  The Fed also signaled it intends to do two more hikes this year, instead of one.  There have not been four hikes in one year since 2006.

As justification, the Fed cited the economy is growing at a “solid” rate, job gains have been “strong” in recent months and “recent data suggest that growth of household spending has picked up, while business investment has continued to grow strongly.”  They also eliminated the language suggesting their policy would “for some time” remain accommodative, indicating monetary policy is near a neutral rate setting with the economy at full employment and price stability, effectively achieving the elusive 2 percent inflation target they’ve hoped for.

Fed Chair Powell said he will hold briefings after all policy meetings, not just quarterly.  This will allow for greater communication as well as spontaneity, which leaves the door open for rates hikes to happen at closer or wider intervals, as seen fit.

With the expectation of even higher rates ahead, take the time to review your future interest rate obligations. Hedging through the use of medium-term swaps will save your business money over the term of your loans.

 

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