Federal Reserve Board Chairman Jerome Powell announces the Fed is raising interest rates at a news conference after a Federal Open Market Committee meeting in Washington, DC, USA, 26 September 2018. The Feds raised their benchmark interest rate by a quarter point.Powell announces Fed raising interest rates, Washington, USA - 26 Sep 2018

The Federal Reserve lifted interest rates for the third time this year Wednesday, shrugging off concerns that higher rates could weigh on consumer spending.

In keeping with its strategy to wean Americans off seven years of easy money policies, the Fed upped its benchmark interest rate by 0.25 percent to a new range of 2 percent to 2.25 percent. The central bank also signaled that another increase could come before Christmas.

“Job gains have been strong, on average, in recent months, and the unemployment rate has stayed low,” the Fed said in its policy statement. “Household spending and business fixed investment have grown strongly.”

This made for a total of eight increases for consumers since 2015 and they will have to brace themselves for several more over the next couple of years. While they’ve taken the increases in stride so far, that could become more difficult as rates creep upward and push borrowing costs higher.

The concern for retailers is that maintaining credit-card balances, student loans and many mortgages will become more expensive as rates continue to edge upward, which could lead consumers to start to curb discretionary spending.

Nevertheless Jerome Powell, the Fed’s chairman, played down these worries, telling reporters at a press conference in Washington, D.C., that while the cost of borrowing is going up, it’s from what were extraordinarily low levels.

“Interest rates are going up across a broad range of consumer borrowing as they would when we raise short term interest rates. They’re still quite low by historical levels,” Powell said. “It’s something we watch carefully.”

As for tariffs pushing up prices of goods due to the worsening trade dispute between the U.S. and China, Powell stated that it was a “risk.”

“You could see prices moving up,” he said. “You don’t see it yet, but you could see retail prices moving up. The tariffs might provide a basis for companies to raise prices in a world where they’ve been very reluctant to and unable to raise prices. Raising prices is really difficult with the ability to shop on the Internet.

“The other question would be if you’re just talking about the effect on inflation, is it just a one-time increase in the price level or is it actually fueling higher inflation going forward? That’s an important question in how we would think about the appropriate response,” he said.

The rate hike came two days after President Trump imposed 10 percent tariffs on $200 billion of Chinese imports, many of them consumer facing. These will rise to 25 percent by Jan. 1 and a number of major retailers have warned that they will be left with little choice but to raise prices at the checkout.

“If this perhaps inadvertently goes to the place where we have widespread tariffs that remain in place for a long time and a more protectionist world, that’s going to bad for the United States’ economy and for American workers and families and also for other economies,” Powell said.