Fed raises interest rates, leaves outlook unchanged

WASHINGTON — The Federal Reserve raised interest rates on Wednesday but left its rate outlook for the coming years unchanged even as policy makers projected a short-term jump in US economic growth from the Trump administration’s proposed tax cuts.

In an early verdict on the tax overhaul, Fed policy makers judged it would boost the economy next year but leave no lasting impact, with the long-run potential growth rate stalled at 1.8%. The White House has frequently said its tax plan would produce annual GDP growth of 3-4%.

The expected fiscal stimulus, coming on the heels of relatively bullish data, cleared the way for the US central bank to raise rates by a quarter of a percentage point to a range of 1.25% to 1.50%. It was the third rate hike this year.

But the Fed’s forecast of three additional rate increases in 2018 and 2019 was unchanged from its projections in September, a sign the tax legislation moving through Congress would have a modest, possibly fleeting, effect.

The rate increase represented a victory for a central bank that has struggled at times to deliver on its promised pace of monetary tightening. It also allowed Fed Chair Janet Yellen, at her final press conference before her term ends in February, to signal an allclear for the US economy a decade after the onset of the 2007-2009 recession. “At the moment, the US economy is performing well. The growth that we’re seeing, it’s not based on, for example, an unsustainable buildup of debt… The global economy is doing well, we’re in a synchronized expansion,” Ms. Yellen said. —