The Federal Reserve raised short-term interest rates Wednesday, a widely expected move that President Trump has called “foolish” but that the central bank felt was necessary to keep the U.S. economy thriving.

The Fed believes this rate increase will keep the economy from overheating, but the central bank downgraded its economic outlook for 2019 and indicated fewer rate hikes next year, according to the central bank’s statement.

“Our forecast for next year is we’ll still have solid growth next year, declining unemployment and a healthy economy,” Fed Chair Jerome H. Powell said during a news conference after the release of the Fed statement.

But Powell acknowledged there is a “fairly high degree of uncertainty” about where the economy and rates are going.

In September, the Fed predicted it would do three more interest rate hikes in 2019. Now the Fed predicts two hikes, a sign of more caution. Fed leaders also lowered their growth forecast for next year from 2.5 percent to 2.3 percent, a signal that head winds are rising. The central bank said it was closely watching “global economic and financial market developments.”

“The Fed is now acknowledging some of the early signs of weakness in the economy,” said Lindsey Piegza, chief economist for Stifel Fixed Income. “Fed officials see the expansion slowing and potentially coming to an end so there is no longer a need going forward for aggressive hikes like we had in 2017 and 2018.”

The latest move by the Fed brings interest rates up a quarter-point to a range of 2.25 percent to 2.5 percent, the highest rate in more than a decade. It will make it more expensive for Americans to borrow money from the bank or on their credit cards.

But the new rate is still low by historical standards, and the Fed said in a statement that the rate hike was justified because job gains have been “strong,” inflation remains tame and consumer spending, which powers U.S. growth, “has continued to grow strongly.”

“Wages have moved up for workers across a wide range of occupations, a welcome development,” Powell said during the news conference.

“Economic activity has been rising at a strong rate,” the Fed said in its statement, adding that “some further gradual increases” in rates are likely needed. The word “some” is new in the statement and is likely meant to signal the Fed is getting close to pausing the hikes.

The Fed expects unemployment to fall to 3.5 percent next year, even lower than this year, and inflation to remain at a modest 1.9 percent. The Fed typically hikes interest rates to keep inflation in check, but the central bank slightly lowered its inflation forecast for next year, a sign Fed leaders aren’t expecting a major surprise.

While the hike was widely expected — 84 percent of economists surveyed by The Washington Post thought it was the right move — markets have been on edge in recent weeks about whether the economy is going to slow gently or sharply next year and how the Fed will react. Fed Chair Jerome H. Powell is trying to assess whether the market sell-off is temporary or indicative of deeper problems ahead.

The Dow Jones industrial average has fallen 10 percent from its September peak, wiping out all gains for the year and setting up the Dow for its worst annual performance since 2008. Other markets, especially high-yield debt, are also showing signs of stress and making it more difficult for companies to borrow money.

Stocks swung dramatically following the Fed news, with all three major indexes tumbling.

The Dow fell to a new low for the year. It had been cruising upward 300 points most of the day but was 504 points in the red, more than a 2 percent loss, during Powell’s news conference. The Nasdaq Composite dropped 168 points, 2.5 percent, into negative territory. The S&P 500 plunged 50 points, or 1.8 percent.

The closely watched yield on the U.S. Treasury 10-year note pulled back to 2.765 percent,

Trump has criticized the Fed and Powell, blaming the rate hikes for a market sell-off. The president tweeted twice this week that it would be “a mistake” for the Fed to raise interest rates again, and he has repeatedly called the central bank “foolish” and “crazy.”

Powell said the Fed remains independent and decides monetary policy “in a nonpolitical way.”

“Political considerations have played no role whatsoever in our discussions or decisions about monetary policy”, he said.

But many parts of the economy continue to show strength. Unemployment remains at nearly a 50-year low, and growth is hovering around 3 percent this year, which would be the fastest annual pace of growth since 2005.

“If Fed officials overreact to the market moves, which are only taking us back to where the market was about a year ago and still leave us with one of the strongest bull markets in history, they would severely depreciate their credibility,” said Tendayi Kapfidze, chief economist at LendingTree.

The decision Wednesday to hike rates was unanimous with all 10 Fed leaders voting in favor of the increase. The Fed’s next meeting takes place Jan. 29-30, and the Fed will hold a news conference after all eight meetings next year in which leaders decide on interest rates, which has never happened before and should give Powell more flexibility to adjust policy and respond to the latest market and economic conditions.

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