The Federal Reserve on Wednesday announced liftoff for short-term interest rates — a launch that may send many borrowing costs higher in 2016.
The 0.25-percentage-point increase — to a range of 0.25 percent to 0.5 percent — in the federal funds rate was small but important because it signals the beginning of the end of easy money; the Fed wants to get back to normal after years of fighting economic stagnation with supercheap loans.
The economy has improved enough to be able to handle higher rates, the Fed said. "A range of recent labor market indicators, including ongoing job gains and declining unemployment, shows further improvement and confirms that underutilization of labor resources has diminished appreciably since early this year," the Fed policymakers said in a statement released at the end of their two-day meeting in Washington.
The policymakers said they expect "only gradual increases" in rates, adding that "the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."
Federal Reserve Bank Chair Janet Yellen holds a news conference after the central bank announced its first rate increase in more than 9 years.
In a news conference after the announcement, Fed Chair Janet Yellen appeared to caution people not to overreact to the increase, saying, "it is a very small move":
Yellen spoke about the importance of timing rate hikes correctly, saying Fed officials cannot afford to wait until it's too late to act:
News Sources-npr
