For only the second time since the financial crisis of 2008, the Federal Open Market Committee (FOMC) voted to raise its target range for the federal funds rate 0.25 percentage points to 0.5 percent to 0.75 percent on Dec. 15.
The reevaluation concurs with a rising percentage of Americans showing optimism in potential economic improvements ahead. Projections for GDP growth and inflation have both risen, while predicted unemployment lowered, according to the economic projections of Federal Reserve board members and Federal Reserve bank presidents.
That surge came in the last six weeks, likely tying it, to a certain degree, to the results of the presidential election. Yet matters were helped by falling unemployment rates from October to November, consistent GDP growth and an increase in worker productivity after three quarters of decline.
This follows on the heels of a statement by Federal Reserve Chairwoman Janet Yellen earlier this year, in which she said that labor market improvements have exceeded Fed expectations, though she has not been without reservations about the system in general.
“There’s no getting around the fact that monetary policy in the United States and many other advanced countries has been under a substantial burden and has not gotten a lot of help from fiscal policy,” Yellen said.
While inflation has not consistently hit the Fed’s target, the Fed has indicated that it and global economic developments are the current risks to be watched.