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Fed Raises Interest Rates at Last
The Federal Reserve will increase its benchmark interest rate to between 0.25% and 0.50% on Thursday.
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The Federal Reserve will increase its benchmark interest rate to between 0.25% and 0.50% on Thursday. The rate has been at 0% to 0.25% since December 2008.
Wall Street responded positively to the long-expected news. The Dow Jones industrial average gained 224 points to close at 17,749.09, up 1.3%. The NASDAQ rose 1.5% to close at 5,071.13.
The central bank repeatedly emphasizes that subsequent increases will be “gradual” and “prudent” and won’t follow a predetermined schedule. Economists predict the rate will creep up to about 1.4% by the end of next year, about 2.4% by the end of 2017 and 3.25% in 2018.
The Fed also raised its economic outlook for the country. It now predicts growth in 2016 will be 2.4%, up from a September forecast of 2.3%.
The central bank notes “considerably improvement” in the country’s labor market. But it doesn’t expect inflation, currently languishing slightly above zero, to reach the desired 2% until 2018. The Fed signals that further interest rate increases aren’t likely until inflation advances.
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