Fed raises key interest rate again

WASHINGTON - The Federal Reserve has raised its benchmark interest rate for the second time in three months and forecast two additional hikes this year. The move reflects a consistently solid U.S. economy and will likely mean higher rates on some consumer and business loans.

The Fed's key short-term rate is rising by a quarter-point to a still-low range of 0.75 percent to 1 percent. The central bank said in a statement that a strengthening job market and rising prices had moved it closer to its targets for employment and inflation.

The message the Fed sent Wednesday is that nearly eight years after the Great Recession ended, the economy no longer needs the support of ultralow borrowing rates and is healthy enough to withstand steadily tighter credit.

The decision, issued after the Fed's latest policy meeting, was approved 9-1. Neel Kashkari, president of the Fed's regional bank in Minneapolis, was the dissenting vote. The statement said Kashkari preferred to leave rates unchanged.

The Fed's forecast for new hikes, drawn from the views of 17 officials, still projects that it will raise rates three times this year, unchanged from the forecast in December. But the number of Fed officials who say they think three rate hikes will be appropriate for 2017 rose from six to nine.

Stocks clambered higher for their biggest gain in two weeks and easily absorbed the Fed's latest increase in interest rates, a move that was widely expected.

The Standard & Poor's 500 index jumped 19.81 points, or 0.8 percent, to 2,385.26. It had been up through the day, and the gains accelerated immediately after the Fed made its announcement.

The Dow Jones industrial average rose 112.73 points, or 0.5 percent, to 20,950.10. The Nasdaq composite picked up 43.23 points, or 0.7 percent, to 5,900.05. The Russell 2000 index of small-company stocks jumped 20.45 points, or 1.5 percent, to 1,382.83.

The yield on the 10-year Treasury fell to 2.49 percent from 2.60 percent late Tuesday, and the 30-year yield fell to 3.11 percent from 3.18 percent.

The dollar sank to 113.39 Japanese yen from 114.72 yen late Tuesday. The euro rose to $1.0713 from $1.0632, and the British pound climbed to $1.2301 from $1.2145.

Gold settled early in the afternoon at $1,200.70 per ounce, down $1.90. But it climbed following the Fed's announcement and was trading at $1,221 late Wednesday. Silver and copper also rose after the announcement.

The Commerce Department said early Wednesday that retail sales inched up 0.1 percent in February, and it said sales in January were better than it previously believed. However delays in tax-return payments may be holding spending back somewhat.

A housing market index by the National Association of Home Builders also surged to its highest level since 2005.