Federal Reserve Hikes Interest Rates
Dec-18-2015

After seven years of rock-bottom interest rates held low to stanch the bleeding from the worst financial crisis since the Great Depression, and after months of unusually public hand-wringing over the precise timing of liftoff, the Federal Reserve on Wednesday approved a rate hike intended to start easing U.S. monetary policy back to normal.

The historic decision marks the final break from an era of unprecedented interventionist monetary policy initiated in the wake of the 2008 financial crisis.

The policy-setting Federal Open Market Committee voted unanimously to raise rates by 0.25% to a range of 0.25%-0.50%, not a whole lot but enough to test the still-weakened U.S. economy's ability to absorb the higher borrowing costs that will follow the increase.

Citing healthy momentum in the U.S. labor markets and confidence that inflation is starting to climb upward toward the Fed's 2% target, the Fed pulled the trigger on the first rate hike in nearly a decade.

"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% objective," the FOMC said in its statement released at the conclusion of Wednesday's meeting.

With interest rates moving higher it will soon be more expensive for consumers to borrow money to buy big-ticket items such as homes, cars and appliances. Business will also pay more if they borrow to cover the costs for expansion and other capital investments.

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Posted by Ken at 1:00 AM - Link to this entry  |  Share this entry  |  Print