The Federal Reserve announced to increase U.S. interest rate for the second time in 2017 and provided details for shrinking the balance sheet.
The policy makers agreed to increase its benchmark rate by a quarter point to a new range of 1 percent to 1.25 percent. The Federal Open Market Committee also maintained its forecast for one more rate hike this year.
“Near-term risks to the economic outlook appear roughly balanced, but the committee is monitoring inflation developments closely,” the Federal Open Market Committee said in a statement Wednesday. “The committee currently expects to begin implementing a balance sheet normalization program this year, provided that the economy evolves broadly as anticipated.”
The move came after two reports posted weaker-than-expected economic data earlier on Wednesday. According to the Commerce Department, retail sales fell 0.3 percent in May, which was the first decline since February and biggest drop in 16 months since January 2016. In a separate report from the Labor Department's, Consumer Price Index declined 0.1 percent in May. In the 12 months through May, the index rose 1.9 percent.
Now the Fed said the inflation will be below its 2 percent target.
“Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the committee’s 2 percent objective over the medium term,” the statement said.