Basically the Federal Reserve Bank feels that the U.S. economy has recovered:
“The Federal Reserve hiked interest rates for the first time in nearly a decade on Wednesday, signaling faith that the U.S. economy had largely overcome the wounds of the 2007-2009 financial crisis.” Reuters: http://www.reuters.com/article/us-usa-fed-idUSKBN0TY2EX20151218
- The Federal Funds Rate has been raised to 0.25% (referred to as 25 basis points), that’s the interest rate that one bank pays another bank for funds kept at the Federal Reserve Bank. These are overnight deposits kept at the Federal Reserve Bank.
- Banks have raised the Prime Rate, that’s the rate that banks charge their “best” customers for borrowing money from the banks.
- Savings account interest paid to savers will NOT be raised by the banks.
What does it affect and what’s next?
Here’s a couple of links commenting on consequences of the Fed rate hike:
The Fed Raised Interest Rates so what happens next?
Here’s an article from the New York Times:
Why the Fed Raised Interest Rates http://www.nytimes.com/interactive/2015/09/12/business/economy/fed-rates-explainer.html?_r=0
FED RAISES RATES BY 25 BASIS POINTS, FIRST SINCE 2006 CNBC does a nice job of explaining the Fed’s move. http://www.cnbc.com/2015/12/16/fed-raises-rates-for-first-time-since-2006.html
“In addition to raising the funds rate, the committee pushed the interest paid on excess reserves to 0.5 percent and put the rate on overnight reverse repo operations to 0.25 percent, both in conjunction with the sale of securities that will be needed to push the rate higher.”
Here’s links to earlier posts that I have written about the Federal Reserve Bank:
Author’s note 8/12/16: Here’s an update on opinions that the Federal Reserve will raise rates again in year 2016. The belief seems to be at this time that one more rate increase could happen. Here’s the opinion of the Wall Street Journal: Wall Street Journal