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US Fed hikes interest rate by 25 basis points
16 Dec 2015 at 19:51hrs | Views
WASHINGTON - The Federal Reserve said on Wednesday that it would raise short-term interest rates for the first time since the financial crisis struck, a vote of confidence in the strength of the American economy at a time when much of the rest of the global economy is struggling.
The widely anticipated decision, a milestone in the Fed's post crisis stimulus campaign, ends a seven-year period in which the Fed held short-term rates near zero. Even as it raises its benchmark interest rate by 0.25 percentage points, to a range of 0.25 to 0.5 percent, however, the Fed emphasized subsequent increases would come slowly.
Interest rates on mortgages and other kinds of loans, and on savings accounts and other kinds of investments, are likely to remain low by historical standards for years to come.
The Fed's announcement cited the strength of job growth, and the broader backdrop of a moderate-but-steady economic expansion, as evidence that the economy no longer needed quite as much help from ultralow borrowing costs.
"The committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2 percent objective," the Fed's policy-making committee, the Federal Open Market Committee, said in a statement released Wednesday afternoon after the end of a two-day meeting.
The decision to raise rates was supported by all 10 voting members of the Federal Open Market Committee despite the concern three of those officials had expressed in recent months that the economy might not be ready for higher rates. That concern is shared by some outside economists, and by Democrats who argue the Fed is prematurely curtailing job and wage growth.
Fed officials predicted in a set of forecasts also published Wednesday that they would raise interest rates by about one percentage point a year over the next three years, reaching 3.3 percent by 2019.
Source - washington post