The Federal Reserve is expected to raise short-term interest rates by one-quarter point on Wednesday. That will bring the fed funds target range from 1.0% to 1.25%, marking the first time that the fed funds rate has crossed 1.0% since the Fed lowered the rate to near zero in late 2008 when the financial crisis took hold.
This rate hike will be justified on the grounds that labor markets continue to tighten, a key measure for members of the Federal Open Market Committee (FOMC). Members of the committee will cite the easing of financial market conditions since the most recent rate hike in March. The rally in the bond market has been fairly significant as much of the optimism surrounding tax reform, deregulation and infrastructure spending is fading.
Some committee members, including the influential Governor Lael Brainard, are concerned about the recent deceleration in inflation