Federal Reserve rate hike reflects new world of sticky inflation and faster growth

President Donald Trump has renewed his attacks on the Federal Reserve after it hiked its benchmark interest rate Wednesday, but the Fed matters less than broader economic trends when it comes to longer-term borrowing costs, economists say.

Background: what a Federal Reserve rate decision changes

The federal funds rate concerns overnight lending between depository institutions. It is not the interest rate on every household or business loan. Changes can influence other interest rates, credit conditions and exchange rates, and ultimately employment and prices. That chain of effects is why a central-bank announcement matters beyond financial markets.

The Federal Open Market Committee assesses economic and financial conditions when deciding its policy stance. Its meeting statement and minutes serve different purposes: the statement communicates the decision, while the minutes provide a fuller account of the discussion. Reading the dated official documents helps distinguish an announced decision from a prediction about what the committee might do next.

This background explains the policy mechanism, not the outcome of the meeting described above. For that outcome, check the original report against the corresponding official statement. A forecast of a cut is not confirmation that a cut has happened, and a policy change does not establish what any individual lender will charge.

Background source: Federal Reserve overview of the FOMC.

Read the original report at apnews.com.