Fed raises rates by a quarter of a point: it is the first time since June 2006 – The Messenger

The Fed opens a new phase, ending the era of rates equal to zero, which began in 2008 with the financial crisis. The US central bank raises, with a historic move, the interest rates by a quarter point to 0.25 to 0.50%: This is the first increase since June of 2006. Then ensures: monetary policy remains accommodative and Subsequent increases will be gradual. Wall Street, which initially seems to be affected by months of waiting and already digested, accelerates with each passing minute, seeing the rise as the Fed’s injection of confidence in the American economy.

The American markets closed with positive increases in excess of 1%, despite the decline in oil prices, fell to $ 35.52 per barrel with the increase stronger than expected US oil inventories. The European markets are already closed when the Fed announces the close. The session was lackluster in the Old Continent. Almost all the markets were closed up, except for Milan. Milan Stock Exchange closed down 0.29%. The increase in “moderate” rate “recognizes the progress of the economy,” says the chairman of the Fed, Janet Yellen, noting that the move brings an end to an “extraordinary step” of monetary policy. A phase that began in 2008, the last time rates were touched: the then head of the central bank was Ben Bernanke, December 16, 2008, exactly seven years ago, he had brought the cost of borrowing at historic lows, to zero. Just Bernanke was the last to decide to increase interest rates in June 2006. The importance of the first rate increase “should not be exaggerated,” he adds, however Yellen, reiterating that the successive increases will be gradual.

“We want to move wisely, in a gradual manner,” explains during the press conference, explaining that the Fed wants to see the impact of tight financial conditions. “The conditions we set for an increase were centered,” adds the Fed chairman in what is probably the most important press conference in recent years for the US central bank. “Waiting too long for an increase could create problems”, and also force the Fed to proceed more quickly with subsequent increases in the cost of money. The average rate forecasts of the members of the FOMC will indicate that 1.375% at the end of 2016. The cost of borrowing will rise to 2.375% by the end of 2017 and 3.25% in three years. The forecasts imply four increases of a quarter point next year.

The increase was decided in the light of the improvement in the US economy and the conditions of the labor market. And in light of the confidence that, in the medium term, inflation will return to 2%. “Information received from the October meeting suggest that economic activity will expand at a moderate pace,” the Fed said, stressing that “the risks to the Outlook for economic activity and the labor market are balanced. The inflation will return to 2% over the medium term. The Fed is expected that the GDP will grow by 2.3%, before increasing to 2.4% in 2016 and 2.2% in 2017. Inflation will rise to 2% by 2018.