Emboldened by a strengthening economy, the U.S. Federal Reserve, as widely expected, raised short-term interest rates by 0.25% on Wednesday, bringing its benchmark policy rate to between 1.25% and 1.50%. In an accompanying statement, the central bank's policy-making arm said ''This change highlights that the committee expects the labor market to remain strong, with sustained job creation, ample opportunities for workers and rising wages.''

Fed officials have been awaiting progress toward their inflation target, which has been elusive for most of 2017. The Fed's preferred inflation gauge, excluding volatile food and energy categories, climbed 1.9% in October at a three-month annual rate, below the Fed's 2% inflation target.

''Unless U.S. growth picks up considerable steam and inflation firms, the Fed will likely continue on its slow-but-steady approach to interest rates increases,'' said Paul McCormick, Senior Vice President, Investment Sales and Capital Services. ''There are certainly plenty of pockets of strength in the economy.“

Indeed, home sales and consumer spending are among several recent robust indicators. Data on new home sales in October rose to a 10-year high, and contracts signed for existing homes rebounded sharply during the month following several months of declines. Consumer spending grew 0.3% in October from the prior month after rising 0.9% – the quickest growth in eight years – in September. Meanwhile, a recent survey showed consumer confidence reaching a 17-year high.

With the unemployment rate at its lowest since the beginning of the century, the labor market is by far the economy's biggest positive. Gross domestic product grew at a 3.1% annual rate in the second quarter and 3.3% in the third quarter, significantly higher than the first quarter's tepid 1.2% growth. Some forecasters anticipate growth between 2.5% and 3% in the fourth quarter.

Treasury bonds have traded within a narrow range in recent weeks as investors mulled the potential impact of government tax cuts. Lower corporate tax rates could lift company earnings and boost growth, diminishing the allure of safe-haven assets, such as Treasuries. The tax overhaul may also push wages higher, which could fuel inflation and therefore erode the value of fixed payments on bonds. Lastly, the overhaul may force the government to borrow more, which could push yields higher due to added supply.

Treasury yields have fallen in recent days after Special Counsel Robert Mueller issued indictments in an investigation into Russian interfering with the 2016 U.S. election. Some contend this could sidetrack President Trump's legislative priorities, namely lowering tax rates for individuals, corporations and other businesses.

The yield on the 10-year Treasury note, last trading at 2.38%, is sharply below a two-year peak of 2.61% reached in March, but not far from 2.45% at the end of last year.

Even if the Fed tightens monetary policy further, rates should remain attractive in 2018 because an abundance of traditional and alternative lenders are competing for business in the marketplace right now, allowing investors ongoing access to attractive and reliable financing.