The decision by the Federal Reserve's Open Market Committee to raise a key interest rate by a quarter point to a range of 1.25 to 1.5 percent is the third increase for the year of 2017, part of the Fed's plan to gradually increase interest rates.
Another major announcement from the Fed's conference was their announcement that they were raising their GDP growth estimate from 2.1 percent to 2.5 percent in Q3 2018. Healthy economic growth of 3 percent or higher is expected for Q1, Q2, and possibly Q4 of 2018.
However, growth is expected to settle back down to about 2 percent in 2019 and 2020. Unemployment is expected to drop from 4.1 percent in 2017 to 3.9 percent in 2018. Inflation is expected to climb, but not to the 2 percent inflation goal that the Fed has been pursuing.
The Federal Reserve's decision followed a discussion of the likely impact of Republican-led changes to the US tax code and expectations that tax cuts would boost growth in both consumption and production, Federal Reserve Chair Janet Yellen told reporters.
"A stronger pace of investment could boost capital formation and thereby raise productivity growth and potential GDP or output to some extent," Yellen stated in her final press conference on Wednesday. "Exactly how large those effects might be remain uncertain."
On the consumption side of the economy, Yellen said that she and her colleagues mainly see the likely tax package as "boosting aggregate demand."
2017 was a banner year for the US stock market, with the S&P 500 gaining 19 percent over the course of the year.
Yellen's term expires in February, and it fell to US President Donald Trump to choose her replacement. He has chosen Jerome Powell, who was seen as a "safe bet" as he has served on the Federal Reserve Board of Governors since 2012. Powell voted in favor of the interest hike.
