Fed Raises Key Interest Rate For First Time In Year
NEW YORK (CBSNewYork/AP) -- The Federal Reserve has raised a key interest rate for the first time this year and the second increase in more than 10 years.
Fed officials ended their final meeting of 2016 by raising the federal funds rate -- what banks charge each other for short-term loans -- to a range of 0.50 percent to 0.75 percent.
The Fed previously increased rates at the December 2015 meeting from a near-zero level, an unprecedented low that was set in 2008 amid the fallout from the housing bust and financial meltdown.
The sluggish recovery has meant that Fed officials delayed a rapid rate increase, helping to stimulate economic activity by making it cheaper to borrow. The 10 Fed officials voted unanimously for the rate hike, making it the first time since June that they all agreed.
Fed officials are not yet projecting much of a boost to growth from President-elect Donald Trump's policies over the next three years, despite market expectations that Trump's tax cut and deregulation proposals will lift growth.
Fed policymakers now expect the economy will expand 2.1 percent in 2017, barely higher than their earlier projection of 2.0 percent.
Many analysts predicted that Fed officials would make few changes to their quarterly economic forecasts, preferring instead to wait for signs of which policies would be enacted and when.
The Fed now sees the unemployment rate by the end of 2017 declining to 4.5 percent, slightly below its previous forecast of 4.6 percent. Yet the unemployment rate fell last month to 4.6 percent, much earlier than the Fed expected.
Fed officials made no changes to their forecasts for inflation, which they expect to reach 1.9 percent next year. It will hit the Fed's target of 2 percent in 2018 and remain there in 2019, they forecast. That contrasts with a sharp increase in the yield on the 10-year bond, which has jumped about a half point.
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