Fed Raises Short-Term Interest Rate

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Pile of MoneyThe Federal Reserve raised its benchmark short-term interest rates for the first time in more than 9 years.


The action provides a vote of confidence in the economic recovery from the recession by beginning to remove the last of the central bank’s steps to boost economic growth.

Seven years after lowering the rate to near zero, members of the Federal Open Market Committee raised the rate to between 0.25% percent and 0.50 percent.

The action ends months of speculation about whether the economy was strong enough with withstand higher borrowing costs.

Fed Chair Janet Yellen said in a press conference the committee judged that a “modest increase” was appropriate, noting: “The economic recovery has clearly come a long way.”

Federal Reserve officials said in a statement “there has been considerable improvement in labor market conditions this year” and they expect to low inflation to rise in the coming months.

They intend to go slow with any future rate hikes, gradually reducing the stimulus.

The rate “is likely to remain, for some time,” below about 3.5%, according to the Federal Reserve.

Committee members project the rate to increase to at least 1.375% at the end of 2016.

The rate was 5.25% in 2006 when the Fed began lowering it in response that preceded the recession.


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