The Federal Reserve hiked interest rates for the first time in nearly a decade on Wednesday, signaling faith that the US economy had largely overcome the wounds of the 2007-2009 financial crisis.
The US central bank's policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25% and 0.50%, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
"The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2% objective," the Fed said in its policy statement, which was adopted unanimously.
The Fed made clear that the rate hike was a tentative beginning to a "gradual" tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.
"In light of the current shortfall of inflation from 2%, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate," the Fed said.
New economic projections from Fed policymakers were largely unchanged from September, with unemployment anticipated to fall to 4.7% next year and economic growth at 2.4%.
The statement and its promise of a gradual path represents a compromise between those who have been ready to raise rates for months and those who feel the economy is still at risk.
"The Fed is going out of its way to assure markets that, by embarking on a “gradual” path, this will not be your traditional interest rate cycle," said Mohamed El-Erian, Chief Economic Advisor at Allianz.
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The US central bank's policy-setting committee raised the range of its benchmark interest rate by a quarter of a percentage point to between 0.25% and 0.50%, ending a lengthy debate about whether the economy was strong enough to withstand higher borrowing costs.
"The Committee judges that there has been considerable improvement in labor market conditions this year, and it is reasonably confident that inflation will rise over the medium term to its 2% objective," the Fed said in its policy statement, which was adopted unanimously.
The Fed made clear that the rate hike was a tentative beginning to a "gradual" tightening cycle, and that in deciding its next move it would put a premium on monitoring inflation, which remains mired below target.
"In light of the current shortfall of inflation from 2%, the Committee will carefully monitor actual and expected progress toward its inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate," the Fed said.
New economic projections from Fed policymakers were largely unchanged from September, with unemployment anticipated to fall to 4.7% next year and economic growth at 2.4%.
The statement and its promise of a gradual path represents a compromise between those who have been ready to raise rates for months and those who feel the economy is still at risk.
"The Fed is going out of its way to assure markets that, by embarking on a “gradual” path, this will not be your traditional interest rate cycle," said Mohamed El-Erian, Chief Economic Advisor at Allianz.
Click Here To Register For Free Trial Services OR Give A Missed Call : +6531581402 Follow Us On Twitter : www.twitter.com/epicresearchsg Like Us On Facebook : www.facebook.com/EpicResearchSingapore Need Any Assistance Feel Free To Mail Us at : info@epicresearch.sg
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