Fed Raises Rates For the First Time this Year

For the first time in 2016, and only the second time in a decade, the US Federal Reserve voted to raise interest rates.

The key interest rate was raised by 0.25 percentage points to a range of 0.50 percent and 0.75 percent, as the the committee is confident that the US economy will improve.

“Job gains have been solid in recent months and the unemployment rate has declined,” the Federal Reserve said in a statement.

In the last 12 months 2.25 million net new jobs have been created, the labour market has improved, and inflation has moved closer to the Fed’s 2 percent target.

After the announcement and explaining why this decision was made, Fed Chair Janet Yellen said: “My colleagues and I are recognizing the considerable progress the economy has made toward our dual objectives of maximum employment and price stability,”

The Federal Reserve is also predicting that it will raise interest rates three times in 2017, that is up two rate hikes expected in September.

Analyst David Morgan said that the rate hike will not impact the precious metals market and that it will have “very little effect–it is already priced into the market.”

Some economists believe the Fed will need to raise rates more often if President-elect Donald Trump spends big on infrastructure to fight inflation.

“The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate,” the Fed’s statement reads. “The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

It is only the second time the U.S. central bank has raised interest rates since 2006, when the economy had yet to get hit by the financial crisis.

Shortly after the Fed’s decision, the Dow Jones industrial average was down slightly.

Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

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