Fed boosts benchmark rate for third time this year


WASHINGTON (AP) — The Federal Reserve is raising its benchmark interest rate for the third time this year, signaling its confidence that the U.S. economy remains on solid footing 8½ years after the end of the Great Recession.

The Fed is lifting its short-term rate by a modest quarter-point to a still-low range of 1.25 percent to 1.5 percent. It is also continuing to slowly shrink its bond portfolio. Together, the two steps could lead over time to higher loan rates for consumers and businesses and slightly better returns for savers.

The central bank says it expects the job market and the economy to strengthen further. Partly as a result, it foresees three additional rate hikes in 2018 under the leadership of Jerome Powell, who succeeds Janet Yellen as Fed chair in February.

Investors will look to Yellen's final scheduled news conference as Fed chair for any clues to what the central bank might have in store for 2018 under Powell. Powell has been a Yellen ally who backed her cautious stance toward rate hikes in his five years on the Fed's board. Yet no one can know for sure how his leadership or rate policy might depart from hers.

What's more, Powell will be joined by several new Fed board members who, like him, are being chosen by President Donald Trump. Some analysts say they think that while Powell might not deviate much from Yellen's rate policy, he and the new board members will adopt a looser approach to their regulation of the banking system.

Most analysts have said they think the still-strengthening U.S. economy will lead the Fed to raise rates three more times next year. A few, though, have held out the possibility that a Powell-led Fed will feel compelled to step up the pace of rate hikes as inflation finally picks up and the economy, perhaps sped by the Republican tax cuts, begins accelerating.

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