Federal Reserve hikes rates for 2nd time in a decade; more to come

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Janet Yellen
Janet Yellen

Los Angeles : The Federal Reserve on Wednesday surprised the world by increasing interest rates by a quarter of a percentage point to between 0.50% and 0.75%. This is the second time the U.S. central bank has raised interest rates since 2006.

The move was widely expected after US government failed to control the unemployment rate and rising wages thus signaling to the Federal Open Market Committee (FOMC) members.

FOMC is the Fed’s interest rate policy-making body which decides central bank’s goal of 2% per year.

Today’s increase is also seen in relation with the election of Donald Trump as US President.

Fed statement reads: “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate. The federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

According to reports, the decision to raise rates was unanimous and Janet Yellen was successful in satisfying all FOMC members.

Shortly after the meeting, bond yields rose on the prospect of faster rising interest rates in 2017 while the stock markets fell shortly after the decision.

Some are however uncertain whether the Fed is striking the right balance or not.