The Federal Reserve raised short-term interest rates on Wednesday, September 26 by a quarter point. This is the eighth such rate increase since late 2015, which marked the beginning of the Fed’s current inclination towards rising interest rates. The benchmark federal-funds target range is now 2% to 2.25%.
Just as importantly, the Fed will likely continue raising interest rates over the next year. According to the latest CNBC Fed Survey, most economists and market analysts expect one more 0.25% rate increase during the balance of 2018 (in December) and two 0.25% increases during 2019. If these forecasts hold true, then the federal-funds rate target by the end of 2019 would be 2.75% to 3%. Time will tell, of course, and the Fed will decide for certain over the upcoming months as economic data is released.
As it always does, the Fed’s decision to adjust the federal-funds rate has important implications across the financial markets. Meanwhile, our team interprets the Fed’s rising interest rates as a sign that they believe the U.S. economy remains strong and able to digest rate increases. We believe this should be seen as a positive indicator for investors more than a negative one.
Investing outcomes are uncertain, and there are many more pieces of the equation than just the Fed’s interest rate decisions. But the interest rate environment is a significant component of our team’s analysis and investing approach. We look forward monitoring future developments and to helping you remain invested in a way that aligns your investing goals with economic changes like these.