Last week, the Federal Reserve announced an increase in the Federal Funds rate to 1.25 percent. The last time the target rate reached so high was in September of 2008, when the rate was 2.0 percent. In October of that year, the target rate fell to 1.0 percent, and was moved down to 0.25 percent in December. It remained at 0.25 percent for the next 83 months.
This week’s rate increase was the third increase since December 2016, when the Fed increased the rate from 0.5 percent to 0.75 percent.
Compared to the last seven years, this policy looks hawkish by comparison. On the other hand, compared to the 1990s – which were at the time seen as an era of low rates – current policy remains remarkably accommodative.
This post was published at Ludwig von Mises Institute on June 19, 2017.