The decision to raise rates Wednesday “reflects the economy’s continued progress toward the employment and price stability objectives assigned to us by law”, Federal Reserve Chair Janet Yellen said at a press conference.
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The Fed will announce its interest rate decision and monetary policies, at 18:00 GMT today. Fed officials made no secret of their intentions this month, with markets gearing up for a return to “normal” rates after a long period of hovering just above zero.
“The angst out there in the market was the Fed was going to come out swinging”. Although the Fed’s benchmark rate is likely to increase by just 25 basis points, it’s the first in what could be several rate hikes later this year, and it would indicate a speedier pace in hiking than we’ve seen. That will be taken as a hint that there will be two more hikes during the course of 2017.
So what message does this rate hike send to consumers?
Better job, higher pay? .
Oil prices rose following an Energy Information Administration report showing a surprise drop in U.S. crude stockpiles last week, the first weekly drop since December. Meanwhile, labor-market data show more Americans are entering the workforce as wages rise. Fed, in its statement, said it expects “labor market conditions will strengthen somewhat further”. It’ll likely make Trump’s promise to to raise USA economic growth up to a 4 percent annual rate more hard to deliver.
The central bank lowers the rate, as it did following the financial crisis, to stimulate borrowing and spending in response to economic catastrophes, but has slowly elevated it toward what Yellen and her colleagues often refer to as a “neutral” level of 3 percent over the past 2 1/2 years. Prices can begin to rise in a phenomenon known as inflation – which hasn’t happened much since the recession.
Last year, the Fed also erred on the dovish side.
United States interest rates are on the rise. You might want to act sooner rather than later. Higher interest rates typically weigh on stocks. The same can be said for certain auto and mortgage lenders as well, meaning variable-rate mortgage or auto loans could be getting slightly more expensive.
Meanwhile, prices are moving up too. But that’s still below the rate of inflation, said Gregory Daco, Chief U.S. economist at Oxford Economics. The bank said Wednesday there could be two more hikes this year, with an accelerated pace envisaged only for 2019.
But don’t expect the banks to suddenly pay higher interest on your savings account.
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Savings rates have barely budged over the previous year.
