As nearly everybody expected, the US Federal Reserve raised the federal funds rate by 0.25 percentage points today.
Despite the US’s sluggish economic growth in the first quarter, the Federal Reserve Board, led by chairperson Janet Yellen, decided the fundamentals of the US economy are strong enough to support less monetary stimulus—a low rate encourages borrowing and investment.
For the second rate hike in a row, Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, was the lone dissenter among the nine members of the Federal Open Market Committee, the group of Fed board members who vote on setting the federal funds rates.
Though some economists believe the US has reached near full employment, suggesting higher rates are needed to cool the economy down, Kashkari disagrees.
He notes that although the official unemployment rate has reached pre-2008 financial crisis levels, the percentage of employed 25-54 year olds is still more than one percent below pre-crisis levels, but continues to grow each month.