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Interest rates are about to rise again

The Federal Reserve is poised to raise interest rates for the second time this year.The economy has started to...

Posted: Jun 11, 2018 8:29 PM
Updated: Jun 11, 2018 8:29 PM

The Federal Reserve is poised to raise interest rates for the second time this year.

The economy has started to roar: The unemployment rate is 3.8%, tied for the lowest since 1969. Wages are rising faster. And inflation has finally risen to the level the Fed considers healthy.

Investors are almost certain that the Fed will raise rates on Wednesday, at the end of a two-day policy meeting. Policy makers telegraphed in May that they would do just that if the economy kept performing as expected.

The federal funds rate, which helps determine rates for mortgages, credit cards and other borrowing, stands at a range of 1.5% to 1.75%. The Fed is expected to bump it up by a quarter of a percentage point.

Here's what to watch for.

Hearing from Powell

Fed Chairman Jerome Powell will hold a news conference after the decision. You can bet that reporters will ask for his views on escalating trade tensions, and what they might mean for the economy and monetary policy.

Trade tensions are even higher after President Trump disavowed a joint statement at the Group of 7 meeting over the weekend in Canada. After he refused to sign, he insulted Canadian Prime Minister Justin Trudeau in a series of tweets.

The Trump administration has also imposed steel and aluminum tariffs on Canada, Mexico and the European Union, all US allies. Talks to renegotiate NAFTA are deadlocked. And the White House is planning steep tariffs on Chinese goods.

Economists have warned these trade disputes could dampen global economic growth. But Powell has said the possibility of a tit-for-tat trade war would not affect the Fed's plans to raise rates this year and next. At least not yet.

Related: Trade wars are scary. Why isn't Wall Street freaking out?

What happens next

A rate hike on Wednesday seems certain. But policy makers are closely divided on whether to raise rates a total of three times this year or four.

So far, the official plan is for three. But the Fed has hinted at a more aggressive pace in the coming years to keep the economy from overheating. In March, it shifted its plan for 2019 and called for three hikes instead of two.

Fed officials will release updated economic forecasts on Wednesday. Those could hint at plans for acceleration. But Wall Street isn't betting on it.

"Following the June hike, we continue to expect only one additional hike this year before the Fed pauses at its December meeting," said Ellen Zentner, a Morgan Stanley economist.

Related: It's not just you: Everything really is getting more expensive

Inflation overshoot?

The Fed has been trying to strike a balance: It wants to raise interest rates steadily to keep the economy from overheating, but raising rates too quickly could help start a recession.

One way the Fed judges how quickly to act is by watching inflation. After years of stubbornly low inflation, the Fed's preferred measure finally reached the Fed's target of 2% in March and April.

Fed officials have made clear they won't overreact if inflation overshoots that target. Some of them signaled last month that they would be more than comfortable if inflation were "modestly" above 2% "for a time," according to minutes of their May meeting.

So far, the Fed hasn't defined how much of an overshoot in inflation it would tolerate - or for how long. Policy makers could provide further clues this week.

Minnesota Coronavirus Cases

Data is updated nightly.

Cases: 915942

Reported Deaths: 9606
CountyCasesDeaths
Hennepin1786832038
Ramsey739711046
Dakota67683587
Anoka64112577
Washington40545359
Stearns33631279
St. Louis29591409
Scott25994186
Wright25957217
Olmsted22339130
Sherburne19000127
Carver1670669
Clay12104105
Blue Earth1147970
Rice11451138
Crow Wing11213123
Chisago995379
Kandiyohi9815108
Otter Tail9813127
Benton9033125
Beltrami816997
Goodhue811798
Douglas7875101
Itasca772299
Mower733449
McLeod713084
Winona710258
Isanti700783
Steele685731
Morrison672879
Becker628574
Polk603187
Freeborn561246
Carlton546974
Mille Lacs532479
Lyon528461
Nobles525054
Nicollet522460
Pine515043
Cass501253
Todd492843
Brown470759
Le Sueur459734
Meeker433458
Martin386544
Wabasha375510
Waseca374333
Dodge361112
Hubbard355249
Roseau316231
Fillmore305315
Wadena302940
Redwood281445
Houston272017
Renville268451
Faribault258233
Sibley252317
Pennington252130
Kanabec250136
Cottonwood230132
Aitkin222450
Chippewa220542
Pope207410
Watonwan198020
Yellow Medicine188023
Rock177729
Koochiching176725
Swift173123
Stevens167511
Jackson161016
Clearwater158020
Marshall153522
Murray151811
Pipestone149729
Lake132924
Lac qui Parle123025
Wilkin121116
Mahnomen106014
Norman10509
Grant101510
Big Stone9485
Lincoln8805
Kittson73223
Red Lake71410
Traverse6056
Unassigned545124
Lake of the Woods5265
Cook3071

Iowa Coronavirus Cases

Data is updated nightly.

Cases: 525758

Reported Deaths: 7379
CountyCasesDeaths
Polk81677809
Linn32838430
Scott27126295
Black Hawk22334382
Woodbury20736263
Johnson20150108
Dubuque18996243
Pottawattamie16215214
Dallas15573115
Story1398059
Warren8637107
Cerro Gordo8141125
Clinton7928115
Webster7419124
Des Moines7153106
Marshall675494
Muscatine6717117
Wapello6546145
Jasper630591
Sioux622477
Lee5977106
Marion567697
Buena Vista503449
Plymouth493388
Henry427155
Benton414760
Jones413564
Bremer403873
Boone397042
Washington395464
Carroll373355
Mahaska372366
Crawford355647
Jackson324047
Dickinson317555
Buchanan312743
Delaware303255
Clay297636
Kossuth293477
Fayette290356
Hardin289253
Tama282878
Page276133
Wright270050
Cedar269527
Winneshiek267744
Hamilton262757
Floyd261049
Clayton252360
Poweshiek242043
Harrison240979
Madison237425
Butler237346
Cass235667
Iowa234336
Jefferson228544
Mills225330
Hancock222840
Winnebago222339
Cherokee217347
Appanoose210157
Lyon209842
Allamakee209456
Calhoun199519
Shelby199542
Union197141
Humboldt188231
Franklin188031
Grundy186137
Chickasaw184522
Mitchell184343
Emmet180146
Louisa178653
Sac175626
Guthrie169338
Clarke163629
Montgomery163146
Keokuk152639
Palo Alto152332
Howard150624
Monroe144340
Ida134141
Greene128818
Davis126825
Lucas126127
Monona124940
Worth12309
Pocahontas122125
Adair118239
Osceola105718
Decatur104813
Taylor100914
Fremont98913
Van Buren95922
Wayne86125
Ringgold78429
Audubon77617
Adams5869
Unassigned500
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