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Fed Announces a Hike in the Interest Rates for the First Time in this Year

The Federal Reserve hiked rates for the second time in a decade at the close of its two-day meeting on Wednesday, 14th December, encouraged by signs of an improving economy and labor market. As was widely expected, the Federal Reserve’s Open Market Committee (FOMC) said it would bump up its benchmark interest rate by 25 basis points to between 0.50% and 0.75%. The decision was unanimous. The Fed also guided toward three rate hikes in 2017. That's up from the two increases that officials had projected at their September meeting before Donald Trump was elected.

Investors have been waiting for a rate hike all year and this is the first (and last) one they will get. The most recent rate hike was in December 2015. Investors were convinced that the time had finally come, however, and prior to the announcement, the probability of a hike stood at a remarkable 99.7%, according to the CME Group's FedWatch tool.

The increase came with projections that economic conditions are changing. On inflation, the committee said market-based measures remain low but have moved up "considerably," a word that was omitted from the November statement. On the jobs market, Fed officials indicated that full employment is getting closer.

News Characteristics

Date : Dec 14, 2016
Region : North America
Industry : Banks
Function : Regulation and Compliance
Sub-Function : Regulatory changes