After a prolonged 7 years of extremely accommodating, near-zero interest rates in the United States, the Federal Reserve has today tightened interest rates to between 0.25 and 0.5 per cent.
Today’s historic move is the first increase in almost a decade, and came as no surprise to anyone with the Fed noting, “The economic recovery has clearly come a long way.”
The Fed policy statement indicated further increases will be “gradual”. Markets are expecting four rate rises next year, the first in March and subsequent rises each quarter. Looking further, economists expect the federal funds rate to be 2.25 per cent at the end of 2017, suggesting a further four rate rises in 2017.