A disappointing 1/4 point rate hike... 1/2 would have been preferred
The Federal Reserve raised its target for a key short-term interest rate by a quarter percentage point Wednesday, the first such increase in nearly four years, but said it expected inflation to stay "relatively low."
At the end of a two-day policy meeting, central bankers raised their target for the fed funds rate, an overnight lending rate that influences other borrowing costs throughout the economy, to 1.25 percent from 1 percent, which had been the lowest level in more than 40 years. It was the first such increase since May 2000.
In the closely watched statement accompanying its decision, the Fed's policy committee noted improvement in the economy, including "improved" labor market conditions, but made fairly sanguine comments about inflation, which has shown signs of accelerating recently.
"Although incoming inflation data are somewhat elevated, a portion of the increase in recent months appears to have been due to transitory factors," the Fed said.
With that in mind, the Fed said again that it could be "measured" in raising rates in the future. In the last sentence of its statement, however, it added that it was willing to move more aggressively if inflation data warranted it.
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