The hike is only the second since 2008
December 15, 2016: Citing an improving economy, the US Federal Reserve raised its key interest rate on December 14 for the first time in 2016 by a quarter percentage point. In a statement after a two-day meeting, the Fed said policymakers unanimously agreed to lift the benchmark federal funds rate – the rate banks charge each other for overnight loans — from 0.4% to 0.6%.
The hike is only the second since 2008 despite an unemployment rate that has tumbled from 10% in 2009 to a near-normal 4.6%. “Our decision to raise rates should certainly be understood as reflecting the confidence we have in the progress the economy has made and our judgement that will continue,” Fed Chair Janet Yellen said at a news conference.
Yellen also said that Trump’s blueprint of cutting taxes and beefing up defence expenses may have been a factor for some policy makers in their decision to raise rates. But she added the details of the plan and how much of it Congress will pass are unknown. “We’re operating under a cloud of uncertainty at the moment,” she said.
The move reflects the Fed’s growing confidence that the economy is on a sustainable growth footing — and its judgment that inflation is becoming a bigger danger to the US economy than sluggish growth or another recession.