Fed Raises Key Interest Rate, Suggests More Hikes Coming

It's the first increase in a year
By Newser Editors and Wire Services
Posted Dec 14, 2016 1:24 PM CST
Federal Reserve Chair Janet Yellen testifies on Capitol Hill in November.   (AP Photo/Susan Walsh)

(Newser) – The Federal Reserve is raising a key interest rate for the first time in a year, reflecting a resilient US economy and expectations of higher inflation. The move will mean modestly higher rates on some loans, reports AP. The Fed signaled in a statement Wednesday that additional rate increases will likely be made slowly as the economy improves and inflation edges closer to the Fed's 2% target. The central bank is increasing its benchmark rate by a quarter-point to a still-low range of 0.5% to 0.75%. The Fed last raised the rate in December 2015 from a record low near zero set during the 2008 financial crisis.

President-elect Donald Trump's plans for tax cuts and infrastructure spending have led investors to expect that inflation will pick up in coming months. The economy, after growing at an anemic annual rate of 1.1% in the first half of this year, accelerated to a 3.2% pace in the July-September quarter. That pickup has lifted hopes that the economy will keep rising, fueled by steady hiring gains. The unemployment rate is at a nine-year low of 4.6%. The stock market seemed largely unfazed in the immediate aftermath of the Fed's news, with the Dow down about 20 points on the day. (Read more interest rates stories.)

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