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Federal Reserve raises key interest rate again

Federal Reserve Chair Janet Yellen. Melanie Maxwell/The Ann Arbor News via AP

WASHINGTON — The Federal Reserve on Wednesday raised its benchmark interest rate for the third consecutive quarter, to a range from 1 percent to 1.25 percent.

The Fed has now increased its benchmark interest rate by a full percentage point since 2015, a demonstration of confidence in the health of the U.S. economy, which has added an average of 190,000 jobs a month over the last two years.

The unemployment rate dropped in May to 4.3 percent, the lowest level since 2001.

The latest rate increase brings the Fed one step closer to ending the economic stimulus campaign it began in the depths of the 2008 financial crisis. Low interest rates increase economic growth by encouraging borrowing and risk-taking. The Fed projects that by the end of the year, its benchmark rate will be at a neutral level, neither stimulating nor damping economic growth.