Fed Raises Rate by 0.25%... Wash Says Price Stability Achieved

The U.S. Federal Open Market Committee unanimously voted 12-0 to raise the federal funds rate target range by 0.25 percentage points to 3.75%-4.00%, calling it a measure supporting its dual mandate, while deciding to continue maintaining ample bank reserves.

In its statement, the Fed assessed that economic activity was expanding at a solid pace with high uncertainty but domestic spending showed resilience, productivity and capital investment remained strong, and job growth aligned with labor force expansion. However, inflation remains elevated, and this adjustment is expected to help move closer to the 2% target.

Chair Kevin Wash said in a press conference that the U.S. economy was strengthening, with new jobs, private sector profits, corporate capital investment, and credit flows improving over recent months. He noted that views within the committee widely shared that financial conditions were not tight enough to warrant calling them 'restrictive,' leading to a slight reduction in easing measures.

Wash highlighted that unemployment remained low at around 4.1%, with job openings and average weekly hours increasing, indicating strong labor market conditions. However, inflation has exceeded the 2% target for over five years, and recent summer figures did not signal a meaningful trend shift, prompting today's FOMC decision based on his criteria not being met.

The Fed also stated it cannot influence individual prices like oil or groceries but aims to prevent relative price changes from spreading broadly across the economy, causing secondary and tertiary effects. Long-term bond yields rising were viewed as a result of economic strength, capital investment, and geopolitical factors working together.

Wash emphasized that the Fed's independence lies in each institution staying within its domain, noting trade and fiscal policies are separate matters. He added that the committee does not wait for specific indicators but focuses on trends rather than fixating on individual numbers, which he called a dangerous preoccupation.

He described today's decision as 'cool-headed, serious, and responsible,' while stressing that future decisions will be made without prior judgment and no plans to predict upcoming actions.