In a widely expected move, the Federal Open Market Committee (FOMC) raised the target federal-funds rate by a quarter of a percentage point this afternoon (to an upper bound of 1.5 percent). The governors of the Federal Reserve also kept their forecast for future rate hikes essentially unchanged, with the main change being a slightly higher prediction for the federal-funds rate in 2020. The move signals that the Fed expects to continue on the cautious path that has been characteristic of the institution under Janet Yellen.

The FOMC released a statement repeating language it has used since June to explain the rate hike. “The labor market has continued to strengthen and economic activity has been rising at a solid rate,” it said. It still expects inflation, which has consistently fallen short of its 2 percent target, to reach that number eventually. The expectation of sustained growth and inflation motivates the Fed to raise interest rates so the economy does not overheat.

There are signs that the Fed expects tax reform to boost economic activity. It revised its expectation of GDP growth upward from 2.1 percent to 2.5 percent, and Yellen told reporters that the FOMC expects tax reform to give a “modest lift” to growth. But the higher growth estimate could owe to other factors — like a predicted pickup in global growth — and Yellen cautioned observers that there is “considerable uncertainty” with regard to the tax-reform bill. “My colleagues factored in the expectations of fiscal stimulus” into their forecast, Yellen said, adding that such expectations have been figuring into their forecasts throughout the year. In any event, the Fed does not appear to think tax reform will produce strong enough growth in 2018 to warrant further rate hikes.

Meanwhile, the only substantive change the FOMC made to its statement indicates that it is concerned about downside risks. Where previous statements spoke of the expectation that labor-market would “strengthen somewhat further,” this time the FOMC said it expects conditions to “remain strong.” “It is true that wage gains have been modest,” Yellen said, but she said the labor market is “in the vicinity of full employment.” Yellen will be replaced by Jerome Powell on February 3 if he is confirmed by the Senate.