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Fed Hikes Interest Rates by a Quarter Point
Thursday, December 17, 2015 6:50 AM

Nearly a decade since the Federal Reserve last hiked interest rates and soon after saw the country ride through the worst financial straits since the Great Depression, Chairman Janet Yellin announced the Fed would raise rates by a quarter point.

In the policy statement released at the end of its two-day meeting Wednesday, the Federal Open Market Committee (FOMC), which sets monetary policy for the Federal Reserve, said it has witnessed considerable improvement in the labor market this year and is reasonably confident that inflation will rise in the medium term to its 2 percent objective.

“Given the economic outlook, and recognizing the time it takes for policy actions to affect future economic outcomes, the committee decided to raise the target range for the federal funds rate to 0.25 percent to 0.5 percent,” the committee said.

With the first rate hike since 2006 in the books, the question becomes when will the next step up take place. In its statement, the Fed said that despite the increase, it expects economic conditions to evolve in a manner that “will warrant only gradual increases in the federal funds rate.”

Hampel added that based on the Fed’s statement, the pace of rate increases next year will be modest and therefore unlikely to have a major impact on credit union operations. Of crucial importance will be how fast consumer loan rates rise compared with deposit rates.

The December meeting was the FOMC’s last of the calendar year. Its next meeting is scheduled for Jan. 26-27.