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Fed raises interest rates and signals faster hikes on the way

The Federal Reserve building. (Photo by Chip Somodevilla/Getty Images)

WASHINGTON — Interest rates are going up again.

The Federal Reserve on Wednesday lifted its benchmark rate by a quarter of a percentage point, the second hike this year.

And a majority of policy makers now expect a total of four interest rate increases this year. Fed officials had been split about whether to raise rates three times this year or four.

Policy makers said in a one-page statement that the labor market “has continued to strengthen” and than economic activity “has been rising at a solid rate.”

The federal funds rate, which helps determine rates for mortgages, credit cards and other borrowing, now stands at a range of 1.75% to 2%.

Investors were expecting Wednesday’s quarter-point increase. The Fed is raising rates gradually to keep the economy in check as inflation creeps higher and the job market grows even tighter.

The unemployment rate is 3.8%, the lowest since 2000 and tied for the lowest reading since 1969.

The Fed offered an improved forecast for unemployment this year, lowering its forecast to 3.6%. It also forecast an even lower unemployment rate of 3.5% for 2019 and 2020.