Federal Reserve Raises Key Interest Rate In First Move Since 2015
One year after raising the benchmark interest rate for the first time in nearly a decade, the Federal Reserve is widely expected to nudge rates higher again Wednesday. The move would come as the unemployment rate has stayed below 5 percent for much of 2016.
Officials are expected to raise the federal funds rate by a quarter of a percentage point, moving from 0.25-0.50 percent to a range of 0.50 and 0.75 percent. More boosts would likely follow; consider that in June of 2006, the rate stood at 5.25 percent.
The rates decision will be announced at 2 p.m. ET; Fed Chair Janet Yellen will hold a news conference 30 minutes later. We'll update this post throughout the day.
The rate hike is the first of the year — despite signals from the Fed when it raised rates at the end of 2015 that more boosts were likely in 2016. While economists were encouraged to see U.S. workers' wages finally rising this year, international developments (China's slowdown, Brexit) complicated the picture.
The interest-rate decision follows a two-day meeting of the Federal Open Market Committee. For analysis of the economic picture officials are seeing — and how it might change — here's David Wessel, director of the Hutchins Center at the Brookings Institution, who spoke about the Fed's expected move to NPR's Steve Inskeep for today's Morning Edition:
In addition to the country's economy, Yellen and her colleagues will also be taking into account the ongoing political transition in Washington, where President-elect Donald Trump is preparing to take power and Republicans will continue to lead Congress.
Here's how Wessel, who's a contributing correspondent to The Wall Street Journal, sees the political context:
Raising interest rates is also attractive to federal banking officials who want to accomplish a number of goals — from reloading its most powerful weapon to stimulate the economy to preventing potential bubbles from forming in either the investment or housing sectors.
As NPR's Marilyn Geewax reported ahead of last year's rate hike, "if rates already are as low as possible, then the Fed doesn't have that weapon available to fight off a recession."
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