Why the Fed raised ratesThe U.S. economy added just 155,000 jobs in November, falling short of analysts’ expectations. But the Fed maintained a fairly optimistic view of economic conditions in its statement, noting that “
job gains have been strong, on average, in recent months.” GDP growth is solid and at 3.7 percent, the unemployment rate is still low by historical standards.
Though most workers haven’t gotten a raise in the past year, annual
wage growth (3.1 percent) is higher than it’s been in nearly a decade. Even though the labor market is said by some experts to be approaching full employment, there are still plenty of positions left to fill.
“Employers are forced to compete more for workers and that’s what is driving the wage growth so much higher,” says Sean Snaith, director of the University of Central Florida’s Institute for Economic Competitiveness. “t’s not out of control wage growth, but it is the fastest that we’ve seen to date in this recovery and I think it’s really consistent with a tightening labor market.”
Inflation is near 2 percent and the Fed thinks it will remain below that target in 2019. But FOMC members didn’t hesitate to raise rates in an effort to continue normalizing interest rates and prevent prices from rising too fast in the future. In a press conference following the December meeting, Jerome Powell also noted that rates this year were raised more times than expected
because the economy was stronger and healthier than expected.
https://www.bankrate.com/banking/federal-reserve/fomc-recap/
