{"id":12848,"date":"2015-12-17T09:00:57","date_gmt":"2015-12-17T17:00:57","guid":{"rendered":"http:\/\/spijue.wpengine.com\/news\/fed-raises-interest-rate-from-record-low\/"},"modified":"2015-12-17T09:00:57","modified_gmt":"2015-12-17T17:00:57","slug":"fed-raises-interest-rate-from-record-low","status":"publish","type":"post","link":"https:\/\/www.juneauempire.com\/news\/fed-raises-interest-rate-from-record-low\/","title":{"rendered":"Fed raises interest rate from record low"},"content":{"rendered":"

WASHINGTON<\/strong> \u2014 The Federal Reserve is raising interest rates from record lows set at the depths of the 2008 financial crisis, a shift that heralds modestly higher rates on some loans.<\/p>\n

The Fed coupled its first rate hike in nine years with a signal that further increases will likely be made slowly as the economy strengthens further and inflation rises from undesirably low levels.<\/p>\n

Wednesday\u2019s action signaled the central bank\u2019s belief that the economy has finally regained enough strength 6\u00bd years after the Great Recession ended to withstand modestly higher borrowing rates.<\/p>\n

\u201cThe Fed\u2019s decision today reflects our confidence in the U.S. economy,\u201d Chair Janet Yellen said at a news conference.<\/p>\n

The Fed said in a statement after its latest meeting that it was lifting its key rate by a quarter-point to a range of 0.25 percent to 0.5 percent. Its move ends an extraordinary seven-year period of near-zero borrowing rates. But the Fed\u2019s statement suggested that rates would remain historically low well into the future, saying it expects \u201conly gradual increases.\u201d<\/p>\n

\u201cThe Fed reaffirmed that the pace of rate hikes would be slow,\u201d James Marple, senior economist at TD Economics wrote in a research note. \u201cThe Fed\u2019s expectations for rate hikes next year are set alongside a relatively cautious and entirely achievable economic outlook.\u201d<\/p>\n

Stocks closed up sharply higher. The Dow Jones industrial average, which had been up modestly before the announcement, gained 224 points, or 1.3 percent, for the day.<\/p>\n

The bond market didn\u2019t react much. The yield on the 10-year Treasury note rose slightly to 2.29 percent.<\/p>\n

Rates on mortgages and car loans aren\u2019t expected to rise much soon. The Fed\u2019s benchmark rate doesn\u2019t directly affect them. Long-term mortgages, for example, tend to track 10-year U.S. Treasury yields, which will likely stay low as long as inflation does and investors keep buying Treasurys.<\/p>\n

But rates on some other loans, like credit cards and home equity credit lines, will likely rise, though probably only slightly as long as the Fed\u2019s rate hikes remain modest.<\/p>\n

Shortly after the Fed\u2019s announcement, major banks began announcing that they were raising their prime lending rate from 3.25 percent to 3.50 percent. The prime rate is a benchmark for some types of consumer loans such as home equity loans. Wells Fargo was the first bank to announce the rate hike.<\/p>\n

Among other things, the Fed\u2019s low-interest rate policies have helped jump-start auto sales, which are on track to reach a record 17.5 million this year. And the Fed\u2019s first hike may not slow them.<\/p>\n

Steven Szakaly, chief economist for the National Automobile Dealers Association, says dealers will press financing companies to keep loan rates low. And competition for buyers will spur them to take other steps to hold down rates, such as accepting lower profits.<\/p>\n

\u201cThe rate squeeze will happen between the dealer and its finance company rather than the dealer and the consumers,\u201d Szakaly said. \u201cConsumers won\u2019t even feel it.\u201d<\/p>\n

For months, Yellen and other Fed officials have said they expected any rate hikes to be small and gradual. But nervous investors have been looking for further assurances.<\/p>\n

Yellen indicated that Wednesday\u2019s rate hike was partially defensive. If rates stayed at near zero, the Fed might not have the tools to combat a recession.<\/p>\n

\u201cWe\u2019ve worried about the fact that with interest rates at zero, we have less scope to respond to negative shocks,\u201d she said at her news conference.<\/p>\n

When growth struggles, the Fed often cuts rates to help increase the amount of cash flowing through the economy. But by staying close to zero, the Fed would be unable to cut rates or it would be forced to have negative rates for the first time in its history.<\/p>\n

An updated economic forecast released with the policy statement showed that Fed officials predict that their target for the federal funds rate \u2014 the rate that banks charge on overnight loans \u2014 will end next year slightly above 1 percent. That is in line with the consensus view of economists.<\/p>\n

The Fed\u2019s action was approved by a unanimous vote of 10-0, giving Yellen a victory in achieving consensus.<\/p>\n

The statement struck a generally more upbeat tone in its assessment of the economy. It cited \u201cconsiderable improvement\u201d in the job market. And it expressed more confidence that inflation, which has been running well below the Fed\u2019s 2 percent target, would begin rising. It suggested this would happen as the effects of declines in energy and import prices fade and the job market strengthens further.<\/p>\n

In addition to the funds rate, the Fed is raising three other rates: It lifted the interest it pays on the reserves that banks hold at the Fed to 0.5 percent from 0.25 percent. It raised the rate it pays on a type of short-term loan to 0.25 percent from 0.05 percent. The Fed plans to use those two rates to help meet its new higher target for the funds rate.<\/p>\n

In addition, it announced a quarter-point increase in its discount borrowing rate to 1 percent from 0.75 percent. This is the rate banks pay when they borrow emergency loans from the central bank. This rate typically moves up in conjunction with the Fed\u2019s benchmark rate.<\/p>\n

___<\/p>\n

AP Business Writers Paul Wiseman and Josh Boak in Washington and Tom Krisher in Detroit contributed to this report.<\/p>\n

___<\/p>\n

Watch AP video: https:\/\/youtu.be\/e8fwVFSgx9E<\/p>\n","protected":false},"excerpt":{"rendered":"

WASHINGTON \u2014 The Federal Reserve is raising interest rates from record lows set at the depths of the 2008 financial crisis, a shift that heralds modestly higher rates on some loans. The Fed coupled its first rate hike in nine years with a signal that further increases will likely be made slowly as the economy […]<\/p>\n","protected":false},"author":107,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_stopmodifiedupdate":false,"_modified_date":"","wds_primary_category":4,"footnotes":""},"categories":[4],"tags":[65],"yst_prominent_words":[],"class_list":["post-12848","post","type-post","status-publish","format-standard","hentry","category-news","tag-nation-world"],"_links":{"self":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/12848","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/users\/107"}],"replies":[{"embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/comments?post=12848"}],"version-history":[{"count":0,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/posts\/12848\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/media?parent=12848"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/categories?post=12848"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/tags?post=12848"},{"taxonomy":"yst_prominent_words","embeddable":true,"href":"https:\/\/www.juneauempire.com\/wp-json\/wp\/v2\/yst_prominent_words?post=12848"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}