The U. S. Federal Reserve raised interest rates on Wednesday and said it was keeping the core of its plan to tighten monetary policy intact even as central bank officials said they would likely slow the pace of further rate increases next year.
WASHINGTON (Reuters) – The U. S. Federal Reserve raised interest rates on Wednesday and said it was keeping the core of its plan to tighten monetary policy intact even as central bank officials said they would likely slow the pace of further rate increases next year.
After weeks of market volatility and calls by President Donald Trump to stop increasing borrowing costs, the Fed lifted rates by a quarter of a percentage point. Fed Chairman Jerome Powell also said the central bank would continue drawing down the size of its balance sheet by $50 billion each month.
The rate increase, the fourth of the year, was expected, but Powell’s comments on the balance sheet in a news conference, though a repetition of longstanding Fed policy, prompted a sell-off on equity markets.
The S&P 500 index. SPX was down about 1.6 percent in late afternoon trading. Bond prices rallied and the dollar. DXY, weaker on the day before the decision, regained some ground against most major currencies.
By diminishing its bond market holdings each month, the Fed puts further upward pressure on interest rates, something Trump explicitly requested them this week to stop.
“I think the run-off of the balance sheet has been smooth and has served its purpose, and I don’t see us changing that,” Powell told reporters after the Fed raised its federal funds rate to a range of between 2.25 percent to 2.50 percent.
The central bank did bow to rising uncertainty about global economic growth, and expectations the U.
