The Fed raises rates to 0.25 to 0.50%. After seven years ends the era of “free money” – Il Sole 24 Ore

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This article was published on Dec. 16, 2015 at 20:02.
The last change is the December 16, 2015 at 20:40.

NEW YORK – The Federal Reserve raised US interest rates for the first time in a decade, a move of a quarter of a point that has brought the cost of borrowing in a range between 0.25% -0.50% from 0-0.25% previously. It reaffirmed that the expected future close on the cost of borrowing will be gradual. In the press conference after the meeting, the President Janet Yellen said that today’s decision marks “the end of an era extraordinary.”

The Monetary Policy Committee of the Fed “deemed to have been considerable improvements in the conditions of the labor market this year, and has reasonable confidence that inflation will rise in the medium term, towards its target of 2 percent. ” A rate hike today, he continued, is entitled “from the Outlook Economic and recognition of the time required for interventions to influence future economic outcomes.” Overall, he said, “taking into account the developments in domestic and international risks appear balanced for both the outlook of the economy and for the labor market.”

The Fed expects “economic conditions evolve to ensure only gradual increases in the federal funds rate” and these rates “are likely to remain for some time under the levels that should prevail in the long run ». The average forecast of 17 representatives of top Fed, unchanged compared to September, is four increases of a quarter point next year, leading to the end of 2016 the rate to 1.375 percent.

The Federal Reserve came to the upside after holding interest rates near zero since December 2008 to present and have repeatedly postponed every close before doubts over the US economy and global. The last referral was triggered in September, when the central bank had seemed ready to close, but the crisis of China and the risks of its repercussions were advised to take time. At the next summit in October, however, the Fed had made it clear on the intentions with unusual precision: let it be known that he would consider the rate hike at the next meeting, just as today.
Following President Janet Yellen has repeatedly said in his public speeches, in front of groups and try to Congress, lay still take restrictive measures by the end of year and that this was expected but not with nervousness rather impatiently, why would reflect the improved economic conditions.

The American economy has given encouraging signs, however, still accompanied by symptoms of weakness that have not made it easy mission of the Fed. Growth continues to be around 2% and the rate of labor force participation, the 63%, is the smallest since the Seventies, while inflation, albeit partially crushed by temporary factors considered such as the fall in energy prices, is nailed far below desirable levels of 2 percent. Employment, however, gained momentum, with the creation of 211,000 jobs in November, pushing the unemployment rate to 5%, half of the 10% reached the peak of the crisis.

The Fed funds, the benchmark rates set by the US central bank, were at a record low of 0 to 0.25% from December 16, 2008, that is exactly seven years. To find the last rate hike in the US even we have to go back to June 2006, when Ben Bernanke at the helm of the bank for five months, decided to increase the cost of borrowing to 5.25 percent.

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