Fed raised interest rates for second time since 2008

The U.S. Federal Reserve decided to raise interest rates for the first time in 2016 and the second time in a decade. At the conclusion of its two-day Federal Open Market Committee (FOMC) December meeting, committee members voted unanimously to raise the U.S. central bank’s target range for the federal funds rate to 0.50 to 0.75 percent. The FOMC raised interest rates for the first time in nearly a decade last December.

Janet Yellen, the Fed chairwoman, said “growth is a touch stronger, unemployment is a shade lower” as she announced a 0.25% increase in the benchmark rate to 0.50-0.75%.

Yellen also set out a path of faster pace of rate increases next year than previously expected. The rate setting Federal Open Market Committee (FOMC) said it expected to raise short-term rates by another 0.75% percentage points next year – probably in three separate quarter-point moves – up from a previously predicted 2017 increase of 0.5%. 

The unanimous decision to raise rates, the first time in months that the 10 members of FOMC had all agreed on policy, came at the end of the committee’s first rate-setting meeting since the election of Donald Trump as America’s next president.

Many analysts predicted that Fed officials would make few changes to their quarterly economic forecasts, preferring instead to wait for signs of which policies would be enacted and when.

The Fed now sees the unemployment rate by the end of 2017 declining to 4.5%, slightly below its previous forecast of 4.6%. Yet the unemployment rate fell last month to 4.6%, much earlier than the Fed expected.