WASHINGTON (Alliance News) – The Federal Reserve on Wednesday announced the first interest rate hike since 2006, marking the end of the central bank’s umprecedented zero interest rate policy.
Acknowledging improvement in the jobs market and rising inflation, the Federal Open Market Committee decided to raise the target range for the federal funds rate from 0% to 0.25% to 0.25% to 0.5%.
Looking further out, the Fed sees only “gradual” rate hikes in 2016, according to its so-called “dot plot.” From there, FOMC members expect even slower rate hikes in 2017-2018.
Markets are taking the rate hike in stride, as a strong November jobs report cemented expectations that the Fed would tighten.
The Labor Department said non-farm payroll employment jumped by 211,000 jobs in November compared to economist estimates for an increase of about 190,000 jobs.
The unemployment rate held at the more than seven-year low of 5.0%.
Meanhwhile, “Inflation is expected to rise to 2% over the medium term as the transitory effects of declines in energy and import prices dissipate and the labor market strengthens further,” the Fed said.
Core inflation, which excludes energy and food, is already up 2%.
The vote to raise rates was unanimous, with Federal Reserve Bank of Richmond President Jeffrey Lacker going along with his colleagues after dissenting in September and October.
Rates have been at effectively zero since December 2008, as the Fed reacted to the worst US recession in generations.
Copyright RTT News/dpa-AFX
