Fed hikes key rate, unveils bond trimming plans

Federal Reserve / MGN

WASHINGTON, D.C. (AP) - The Federal Reserve raised its benchmark interest rate for the third time in six months, providing its latest vote of confidence in a slow-growing but durable economy. The Fed also plans to start gradually paring its bond holdings this year, which could cause long-term rates to rise.

The increase in the short-term rate by a quarter-point to a still-low range of 1 percent to 1.25 percent could lead to higher borrowing costs for consumers and businesses and slightly better returns for savers.

The central bank chose to raise rates again despite an economic slowdown at the start of 2017, which it predicts will prove temporary. It foresees one additional rate hike this year, unchanged from its previous forecast. It gave no hint of when that might occur.